25.4k views
5 votes
If 4,000,00 is invested at 5% interest compounded continuosly l, how much will the investment be worth in 25 years?

1 Answer

2 votes

Answer:

$13,961.37

Explanation:

Periodic compounding: P(1 + r/n)^Yn for n equal to

Incidentally, if you know calculus then the continuous compounding formula has a natural interpretation. First let's replace the clunky "FV" notation, and write f(t) for the balance at time t (with t measured in years). So f(t) = Pe^tr

Taking the derivative

d/ dt f(t) = d/dt (Petr) = rPetr = r f(t)

In words, this is saying that

"at any instant the balance is changing at a rate that equals r times the current balance"

which of course is the definition of continuous compounding.

User OFFLlNE
by
5.1k points