Question

Finding present value in Exercise, determine the principal P that must be invested at interest rate r, compounded continously, so that $1,000,000 will be available for retirement in t years.

r = 10%, t = 25

Answer 1

The principal amount is approximately 92296$.

Explanation:

We are given the following in the question:

Amount = $1,000,000

t = 25 years

r = 10%

The principal amount is compounded annually continuously.

Formula:

`A = P(1+r)^t`

Putting all the values, we get

`1000000 = P(1+\displaystyle(10)/(100))^(25)\\\\1000000=P((11)/(10))^(25)\\\\ P = 1000000* ((11)/(10))^(-25)\\\\P = 92295.9981 \approx 92296\$`

Thus, the principal amount is approximately 92296$.