ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Find the initial value of an investment if the future value is $9519.87 after 5 years at a rate of 8.79% compounded continuously.
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$9855.71
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$6134.21
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$14774.19
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$6322.93
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Explanation:
Detailed explanation-1: -Continuous Compound Interest Formula: To find the future value, A, of an initial investment, P, after a certain amount of time (in years), t, at an interest rate of r, we use the formula A=Pert A = P e r t .
Detailed explanation-2: -Calculating the limit of this formula as n approaches infinity (per the definition of continuous compounding) results in the formula for continuously compounded interest: FV = PV x e (i x t), where e is the mathematical constant approximated as 2.7183.
Detailed explanation-3: -Answer and Explanation: The calculated future value of the investment in 2 years is $121.
Detailed explanation-4: -The future value of $500 one year from today if the interest rate is 6 percent is $530.
There is 1 question to complete.