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6 November, 18:43

How much money has to be invested at 3.3% interest compounded continuously to have $45,000 after 19 years?

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  1. 6 November, 18:56
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    We calculate first the effective interest given the terms in this item.

    ieff = e^r - 1

    (effective interest formula here is for compounded continuously cases only)

    ieff = e^ (0.033) - 1 = 0.03355

    The future worth of current investment is calculated through,

    F = P x (1 + ieff) ^n

    Substituting,

    $45,000 = P x (1 + 0.033) ^19

    The value of P is $24,283.23.
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