MATH104 December 2013
• Q1 (a) • Q1 (b) • Q1 (c) • Q1 (d) • Q1 (e) • Q1 (f) • Q1 (g) • Q1 (h) • Q1 (i) • Q1 (j) • Q1 (k) • Q1 (l) • Q1 (m) • Q1 (n) • Q2 (a) • Q2 (b) • Q2 (c) • Q2 (d) • Q2 (e) • Q2 (f) • Q2 (g) • Q3 • Q4 • Q5 • Q6 (a) • Q6 (b) • Q6 (c) •
[hide]Question 01 (h)
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You borrow 10 thousand dollars from Nick the Shark, who charges you at a fixed rate r
that is compounded continuously. If you pay Nick 100 thousand dollars 2 years later,
what was the annual rate of interest that he charged? (A calculator-ready form will
suffice.)
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Make sure you understand the problem fully: What is the question asking you to do? Are there specific conditions or constraints that you should take note of? How will you know if your answer is correct from your work only? Can you rephrase the question in your own words in a way that makes sense to you?
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If you are stuck, check the hint below. Consider it for a while. Does it give you a new idea on how to approach the problem? If so, try it!
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[show]Hint
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Recall that the formula for continuously compounded interest is given by , where A is the new amount, P is the principal, r is the interest rate, and t is the time.
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Checking a solution serves two purposes: helping you if, after having used the hint, you still are stuck on the problem; or if you have solved the problem and would like to check your work.
- If you are stuck on a problem: Read the solution slowly and as soon as you feel you could finish the problem on your own, hide it and work on the problem. Come back later to the solution if you are stuck or if you want to check your work.
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[show]Solution
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For continuously compounded interest, we have the formula where A is the amount, P is the principal, r is the rate, and t is the time.
We are given that . Plugging these in yields

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