Question

Find the future value of a $40,000 annual income stream if it is invested immediately as it is received into an account paying 10% interest compounded continuously for 15 years. Round your answer to the nearest cent.

Answer 1

we know that future value of continuous income stream over a period of M years paying r% interest rate compounded continuously is given by,

we have,

S(t) = $40,000

M = 15 years

r = 10% = 0.1

Hence,

we know that,

Hence,

rounding to nearest cent we can say that,

Hence we can say that future value is $1392675.63