Question

In 19 years, Oscar Willow is to receive $100,000 under the terms of a trust established by his grandparents. Assuming an interest rate of 5.3%, compounded continuously, what is the present value of Oscar's legacy?

The present value of the legacy is $____________. (Round to the nearest cent as needed.)

Answer 1

$36,531.33

Explanation:

You want to know the present value of $100,000 in 19 years at an interest rate of 5.3% compounded continuously.

Future value

The future value will be ...

FV = P·e^(rt) . . . . . . . . principal p invested at annual rate r for t years

100,000 = P·e^(0.053·19) . . . . . . . substituting given numbers

P = 100,000·e^(-0.053·19) ≈ 36,531.33

The present value of the legacy is $36,531.33.

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