Ed computes the ending balance for a CD he is considering. The principal is $20,000, and the interest rate is 2.39%, compounded continuously for 4 years. He uses the formula B 5pert and substitutes directly on his calculator. Look at the keystrokes he entered:
20,000e^(.0239)(4)
He presses ENTER and sees this display:
20000e^(.0239)(4)581935.03152
Ed’s knowledge of compound interest leads him to believe that this answer is extremely unreasonable. To turn $20,000 into almost $82,000 in just 4 years at 2.39% interest seems incorrect to him.
a. Find the correct ending balance, to the nearest cent.
b. Explain what part of Ed’s keystroke sequence is incorrect.