Posted by Anonymous on Sunday, January 11, 2009 at 12:11pm.
Please help me with the following problem. I'm not able to get the right answer! Please provide a full solution that I can follow... thank you.
How much money should be invested now at 7% to obtain $9,000 in 5 years if interest is compounded:
a) Quarterly
b) Continuously

My work:
a)
B = 9000(1 + (0.07/4)^20
B = 12 733
b)
B(5) = 9000e^0.07
B(5) = 0652.57

Textbook answer:
a) $6 361.42
b) $6 342.19

Math: Present Value  economyst, Monday, January 12, 2009 at 9:30am
Quarterly:
For an initial balance B, you want B*(1+.07/4)^20 = 9000.
(1+.07/4)^20 = 1.0175^20 = 1.414778
And 9000./1.414778 = 6361.42 QED
Continuously, you want B*e^(.07*5) = 9000.
e^(.35) = 1.4190675  take it from here. 
Math: Present Value  Anonymous, Sunday, January 25, 2009 at 9:51pm
what is the present value of nine annual cash payments of 4 000 to be paid at the end of each year using an interest rate of 6%.