Find the present value of $26997.18 due in 3 yr at an interest rate of 10%/year compounded continuously.
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See
http://www.jiskha.com/display.cgi?id=1354048579
I disagree with Angela's solution on that page
To find the present value of a future amount due in 3 years at an interest rate of 10% compounded continuously, we can use the formula for continuous compound interest:
PV = FV / e^(rt)
Where:
PV = Present Value
FV = Future Value
r = Interest rate (in decimal form)
t = Time period (in years)
e = Euler's number, approximately 2.71828
Now, let's plug in the given values into the formula:
PV = 26997.18 / e^(0.10 * 3)
First, calculate 0.10 * 3 = 0.3
PV = 26997.18 / e^0.3
Now, let's calculate e^0.3:
e^0.3 ≈ 1.349858807
PV = 26997.18 / 1.349858807
Finally, divide 26997.18 by 1.349858807:
PV ≈ $20,000.00
Therefore, the present value of $26,997.18 due in 3 years at an interest rate of 10% compounded continuously is approximately $20,000.00.