If the university invest in a one year CD at 5.12% interest compounded continuously, the interest it will earn is determined by calculating as: Interest = Future value – Present value which would be $2.54 million
Continuously compounded interest means that a principal amount is constantly earning interest with infinite compounding periods for a certain time period. There are no increment compounding periods as with monthly or annually compounding.
The continuously compounding formula:
FV = PV* e^rt
Where FV is the future amount, PV is the initial amount, e is a mathematical constant (2.7183), r is the rate and t is the time period.
Hence,
FV = 49* 2.7183^(0.0512*1) =51.57
Interest earned= 51.57-49=2.54
Hence, the university will earn an interest of $2.54 million.
Learn more about Continuously compounded interest:
https://brainly.com/question/3932907
#SPJ4
