Joe has to pay $50 000 in 1.5 years' time.If the interest rate is 15% p.a. ,compounded continuously,how much does she owe in present value terms?
A)$46 387
B)$49 077
C)$39 926
D)$37 041

Question

Quizplus · Accepted Answer

We can use the continuous compounding formula to find the present value:
PV = FV/e^(rt)
Where PV is the present value, FV is the future value, r is the interest rate, and t is the time.
Plugging in the values, we get:
PV = 50000/e^(0.15*1.5)
PV = $39,925.90
Therefore, Joe owes $39,926 in present value terms. The closest option is choice C.

Joe Has to Pay $50 000 in 1