How much must you invest now to have 350,000 in 15 years if the interest rate...

How much must you invest now to have 350,000 in 15 years if the interest rate is 10% and compounds continuously?
1. $65,457.33
2. $66,666.67
3. $63,848.93
4. $56,666.67
5. None of these

Solutions

Expert Solution

If interest rate is compounded continously,

Present Value of a future cashflow is given by

PV =

where FV is the future value = 350,000

e is the exponential function nearly equal to 2.73

r is interest rate = 10% or 0.1

t is no. of years = 15

Hence, PV =

= 78095.556

Therefore, option (e) is correct.

jeff jeffy answered 2 years ago

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