You deposit $3000 in an account earning 2% interest compounded continuously. How much will you have in the account in 5 years?
You deposit $3000 in an account earning 2% interest compounded continuously. How much will you have in the account in 5 years?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
You deposit $3000 in an account earning 2% interest compounded continuously. How much will you have in the account in 5 years?
Expert Solution
Step 1
Time value of money :— According to this concept, value of money in present day is greater than the value of same sum of money in future date. It is due to the investment opportunity of present money.
Future Value :— It is the value of present money in future date.
When interest is continuously compounding then we below formula for future value :—
Future Value = PV×ert
Where, PV = Present value of money
e = 2.71828
r = rate of interest per annum
t = time period in year at which FV is required
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