Suppose an investment is expected to generate income at the following rate measured in dollars/year for the next 10 yr.
R(t) = 200,000
Find the present value of this investment if the prevailing interest rate is 8%/year compounded continuously.
$__________?
R(t) = 200,000
Find the present value of this investment if the prevailing interest rate is 8%/year compounded continuously.
$__________?
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For interest compounded continuously, use A = P*e^(rt)
Where:
A = amount after a certain amount of time
P = initial amount
e = constant ~ 2.71828
r = rate in decimal form (8% = 0.08)
t = amount of time passed
If you want the average rate, then just find the amount at 10 years, subtract the initial amount, and then divide by 10 and you get the average rate per year.
Where:
A = amount after a certain amount of time
P = initial amount
e = constant ~ 2.71828
r = rate in decimal form (8% = 0.08)
t = amount of time passed
If you want the average rate, then just find the amount at 10 years, subtract the initial amount, and then divide by 10 and you get the average rate per year.