ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A=Pert
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A=(1+(r/n))nt
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Either A or B
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None of the above
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Detailed explanation-1: -The continuous compounding formula says A = Pert where ‘r’ is the rate of interest. For example, if the rate of interest is given to be 10% then we take r = 10/100 = 0.1.
Detailed explanation-2: -Step 2: The formula for continuously compounded interest is A=Pert A = P e r t . Since we are given everything except the initial investment, P, we can rearrange this equation such that P=Aert P = A e r t . Then, we substitute the given values into the equation for P and solve.
Detailed explanation-3: -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-4: -The basic PERT estimate equation used to determine your expected time is E= (O + 4M + P)/6. Once you have identified each time estimate, they can be plugged into the PERT formula to more effectively calculate a project’s duration.