Problema Solution
What is the present value of $12000 payable three years from now, if you could earn 4% interest compounded continuously?
Answer provided by our tutors
P = $12000 principal amount
r = 0.04 or 4% annual interest rate (as a decimal)
t = 3 years number of years
A = the present value after time t
A = P*e^(r*t)
A = 12000*(2.72^(0.04*3))
A = $13,530.99
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the present value after 3 years will be $13,530.99.