Question

In: Economics

If a deposit of $2,500 per month was made for the next 3 years, determine the future worth of the deposit at an interest rate of 10% per year, compounded continuously?

Expert Solution

We know formula of Future Value (FV) continuous compounding of a cash flow (CF) is given as :-

Where, CF is cash flow each period

e = 2.71828

r is the periodic interest rate

t is total period

As per our question each period is of one month

So,

r = 10% ÷ 12 = 0.8333% = 0.008333

t = 3 years = 3*12 = 36 months

CF = $2500 per month

So, Using above values

So, The future worth of deposit is $104,570

Rahul Sunny answered 2 years ago

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