About Continuous Compound Interest Word Problems:

We sometimes need to solve a word problem that involves the continuous compound interest formula: A = Pe(rt). This formula is used when the number of compounding periods reaches a theoretical maximum.

Test Objectives
• Demonstrate an understanding of how to solve a word problem
• Demonstrate the ability to solve a continuous compound interest word problem
Continuous Compound Interest Word Problems Practice Test:

#1:

Instructions: solve each word problem.

a) Steve invests $2,807 in a 401k account with a fixed annual interest rate that is compounded continuously. After 13 years, the account balance reaches$9,044.13. What is the interest rate of the account?

#2:

Instructions: solve each word problem.

a) Adam invests $1,051 in a savings account with a fixed annual interest rate that is compounded continuously. After 8 years, the account balance reaches$1,698.49. What is the interest rate of the account?

#3:

Instructions: solve each word problem.

a) Daniel invests a lump sum of money in a savings account with a fixed annual interest rate of 5% that is compounded continuously. After 7 years, the account balance reaches $5,676.27. How much was initially invested? #4: Instructions: solve each word problem. a) Harry invests a lump sum of money in a bond fund with a fixed annual interest rate of 7% that is compounded continuously. After 17 years, the balance reaches$10,775.05. How much was initially invested?

#5:

Instructions: solve each word problem.

a) Jacob invests a lump sum of money in a certificate of deposit account with a fixed annual interest rate of 7% that is compounded continuously. After 20 years, the account balance reaches $7,863.03. How much was initially invested? Written Solutions: #1: Solutions: a) 9% #2: Solutions: a) 6% #3: Solutions: a)$4,000

#4:

Solutions:

a) $3,278 #5: Solutions: a)$1,939