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On the day of a child’s birth, a deposit of $25,000 is made in a trust fund that pays 8.75% interest, compounded continuously. Determine the balance in this account on the child’s 25th birthday.

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sqdancefan

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Answer:

  $222,822.57

Step-by-step explanation:

The account balance is given by ...

  A = P·e^(rt)

where P is the principal invested at interest rate r for t years.

  A = $25,000×e^(0.0875·25) ≈ $222,822.57