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24 October, 15:45

An investment is expected to pay 5 per year compounded continuously. If you want the value of the investment to be $700,000 after 25 years, how much should you invest initially? Round to the nearest dollar

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  1. 24 October, 19:29
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    The multiplier for continuous compounding is e^ (rt). You want

    700,000 = P·e^ (0.05·25) ≈ 3.490343P

    Then

    700,000/3.490343 = P

    You should invest $200,553 initially.
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