Find the present value of 50,000 due 10 years later at 6.8% compounded continuously
The present value of an amount due in the future can be calculated using the formula for continuous compounding:
PV = A / e^(rt)
Where:
PV = present value
A = future amount
r = interest rate (in decimal form)
t = time in years
e = the mathematical constant approximately equal to 2.71828
In this case, A = 50,000, r = 0.068, and t = 10. Plugging these values into the formula, we get:
PV = 50,000 / e^(0.068 * 10)
Using a calculator or spreadsheet, we can calculate that e^(0.068 * 10) is approximately 1.967353. Therefore:
PV = 50,000 / 1.967353 = 25,436.59
So the present value of $50,000 due 10 years later with a continuous compounding interest rate of 6.8% is approximately $25,436.59.