An investment will generate income continuously at the constant rate of $1,500 per year for 5 years. If the prevailing annual interest rate remains fixed at 13% compounded continuously, what is the present value of the investment?
A) $551.49
B) $55.15
C) $6,688.26
D) $5,514.86

Question

Quizplus · Accepted Answer

The present value of a continuous income stream is given by the formula:PV = (Income / Interest Rate) * (1 - e^(-Interest Rate * Time))Plugging in the given values, we get:PV = (1500 / 0.13) * (1 - e^(-0.13 * 5))PV = $5,514.86

An Investment Will Generate Income Continuously at the Constant Rate