Question

a. Compute the future value of $1,900 continuously compounded for 7 years at an annual percentage rate of 8 percent. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Future value           $  

b. Compute the future value of $1,900 continuously compounded for 5 years at an annual percentage rate of 11 percent. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Future value           $  

c. Compute the future value of $1,900 continuously compounded for 8 years at an annual percentage rate of 5 percent. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Future value           $  

d. Compute the future value of $1,900 continuously compounded for 5 years at an annual percentage rate of 7 percent. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

Solution a:

Present value (PV) = $1,900

Interest rate (r) = 8%

Time (T) = 7 years

Future value (FV) = PV * e^rt = $1,900 * (2.71828)^(7*0.08)

= $1,900 * 1.75067

= $3,326.28

Solution b:

Present value (PV) = $1,900

Interest rate (r) = 11%

Time (T) = 5 years

Future value (FV) = PV * e^rt = $1,900 * (2.71828)^(5*0.11)

= $1,900 * 1.73325

= $3,293.18

Solution c:

Present value (PV) = $1,900

Interest rate (r) = 5%

Time (T) = 8 years

Future value (FV) = PV * e^rt = $1,900 * (2.71828)^(8*0.05)

= $1,900 * 1.49182

= $2,834.47

Solution d:

​​​​​​​Present value (PV) = $1,900

Interest rate (r) = 7%

Time (T) = 5 years

Future value (FV) = PV * e^rt = $1,900 * (2.71828)^(5*0.07)

= $1,900 * 1.41907

= $2,696.23