An investment is expected to pay 11% per year compounded continuously.If you want the value of the investment to be $900,000 after 25 years, how much should you invest initially? Round to the nearest dollar.

Question

Quizplus · Accepted Answer

We can use the formula for continuous compounding to solve for the initial investment:

A = Pe^(rt)

where A is the final amount, P is the initial investment, r is the annual interest rate, and t is the time in years.

Plugging in the given values:

$900,000 = Pe^(0.11*25)

$900,000 = Pe^(2.75)

P = $900,000 / e^(2.75)

P = $57,535 (rounded to the nearest dollar)

Therefore, the best choice is C.

An Investment Is Expected to Pay 11% Per Year Compounded