With continuous compounding at 8 percent for 20 years, what is the approximate future value of a N$20,000 initial investment?
What is
20,000 (e)^(20(.08)) ?
To calculate the future value of an initial investment with continuous compounding, you can use the formula:
FV = P * e^(rt)
where:
FV is the future value
P is the initial investment
e is the mathematical constant approximately equal to 2.71828
r is the interest rate
t is the time period in years
In this case, the initial investment (P) is N$20,000, the interest rate (r) is 8 percent (or 0.08 as a decimal), and the time period (t) is 20 years.
Now let's calculate the future value using the formula:
FV = 20000 * e^(0.08 * 20)
To compute this, we need the value of the mathematical constant e raised to the power of (0.08 * 20). You can use a calculator or a software application to find the value.
Calculating e^(0.08 * 20), we get approximately 4.66096.
Finally, we can calculate the future value (FV):
FV ≈ 20000 * 4.66096 = N$93,219.20
Therefore, the approximate future value of a N$20,000 initial investment with continuous compounding at 8 percent for 20 years is approximately N$93,219.20.