(4B-6) Continuous Compounding You have $11,572.28 in an account that has been paying an annual rate of 9% compounded continuously. If you deposited some funds 15 years ago, how much was your original deposit?
(4B-6) Continuous Compounding You have $11,572.28 in an account that has been paying an annual rate of 9% compounded continuously. If you deposited some funds 15 years ago, how much was your original deposit?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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problem 4-6 (ignore annuity due); and redo problem 4-6 by changing the word FVA to PVA
Transcribed Image Text:**(4B-6) Continuous Compounding**
You have $11,572.28 in an account that has been paying an annual rate of 9% compounded continuously. If you deposited some funds 15 years ago, how much was your original deposit?
Expert Solution
Step 1: Introduction to time value of money
The concept of time value of money will be used here. As per the concept of time value of money the worth of money changes with passage of time. This is because money has the power to earn interest. Due to this a sum of money invested today gets compounded and grows to a higher future value. Here we are given the future value and we need to compute the present value.
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