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an investment is expected to pay 5 per year compounded continuously. If you want the value of the investment to be $700,000 after 25 years, how much should you invest initially? Round to the nearest dollar
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an investment is expected to pay 5 per year compounded continuously. If you want the value of the investment to be $700,000 after 25 years, how much should you invest initially? Round to the nearest dollar

User Jabez
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1 Answer

1 vote
The multiplier for continuous compounding is e^(rt). You want
700,000 = P·e^(0.05·25) ≈ 3.490343P
Then
700,000/3.490343 = P

You should invest $200,553 initially.
User Mmirzadeh
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8.4k points
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