Find the present value, using the present value formula and a calculator. (Round your answer to the nearest cent.)
Achieve $225,500 at 8.55% compounded continuously for 8 years, 125 days.
P e^(.0855*(8+125/365)) = 225500
P = 110502.63
To find the present value using the present value formula, we need to use the formula:
PV = FV / (1 + r)^t
where:
PV = Present Value
FV = Future Value
r = Interest rate
t = Time in years
First, let's calculate the time in years for 8 years and 125 days. We need to convert the 125 days to years.
125 days รท 365 days/year = 0.34246575 years (rounded to 8 decimal places)
Now, let's plug the values into the formula:
PV = 225,500 / (1 + 0.0855)^8.34246575
To calculate this using a calculator, follow these steps:
1. Divide 1 by the interest rate plus 1: 1 / (1 + 0.0855)
Result: 0.92182577
2. Raise the result to the power of the time period: 0.92182577^8.34246575
Result: 0.60500459
3. Divide the future value by the result: 225,500 / 0.60500459
Using a calculator, the present value is approximately: $372,605.42 (rounded to the nearest cent)
Therefore, the present value, using the present value formula and calculated by a calculator, is approximately $372,605.42.