Science:Math Exam Resources/Courses/MATH104/December 2013/Question 01 (h)

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)  •  

   Other MATH104 Exams

  •  December 2014  •  December 2011  •  December 2010  •  December 2012  •  December 2013  •  December 2015  •  December 2016  •  

Question 01 (h)
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.)

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?

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!

Hint
Recall that the formula for continuously compounded interest is given by $\displaystyle A=Pe^{rt}$, where A is the new amount, P is the principal, r is the interest rate, and t is the time.

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. If you want to check your work: Don't only focus on the answer, problems are mostly marked for the work you do, make sure you understand all the steps that were required to complete the problem and see if you made mistakes or forgot some aspects. Your goal is to check that your mental process was correct, not only the result.

Solution

Found a typo? Is this solution unclear? Let us know here. Please rate my easiness! It's quick and helps everyone guide their studies. For continuously compounded interest, we have the formula $\displaystyle A=Pe^{rt}$ where A is the amount, P is the principal, r is the rate, and t is the time. We are given that $\displaystyle P=10000,A=100000,t=2$. Plugging these in yields ${\begin{aligned}100000&=10000e^{2r}\\10&=e^{2r}\\\ln 10&=2r\\r&={\color {blue}{\frac {\ln 10}{2}}}\end{aligned}}$

Click here for similar questions

MER QGH flag, MER QGQ flag, MER QGS flag, MER RT flag, MER Tag Continuous compound interest, Pages using DynamicPageList3 parser function, Pages using DynamicPageList3 parser tag