Question

At the end of each month, for 24 months, $200 is put into an account paying...

At the end of each month, for 24 months, $200 is put into an account paying 7% annual interest compounded continuously. Find the future value of this account. Round your answer to the nearest cent.

How much money must be invested now at 10% interest compounded continuously so that $120,000 will be available in 5 years? Round to the nearest cent.

Find the amount of money that accumulates when $470,000 is placed annually into a non-interest-earning account for 3 years.

Homework Answers

Answer #1

Future value of 200 payment for 24 months is:

Future value = CF * (e^rt -1)/(e^r -1)
Cash flow CF= 200
Monthly rate r= 0.005833333
Number of payments t= 24
Future value =                       5,137.23

Amount to be invested today to received 120,000 is 72,783.68

Present value= FV / e^(r*N)
Future value FV= 120000
Rate of interest r= 10%
Number of years N= 5
Present value= 120000/ e^(0.1*5)
Present value=                 72,783.68
where e= 2.718281828

When no interest earned, amount that accumulated in three years = 470,000 * 3 = 1,410,000

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