Saturday

October 25, 2014

October 25, 2014

Posted by **Anonymous** on Sunday, January 11, 2009 at 12:11pm.

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 9:30amQuarterly:

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 9:51pmwhat 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%.

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