Question

Find the present value of $4,300 under each of the following rates and periods:

5.7 percent compounded continuously for three years.

Answer 1

The present value of $4,300=$3,624.13

Step-by-step explanation:

The present value is always used to estimate the value of an asset be it financial or financial equivalents to determine their current value accounting for annual interest rates. Continuous compounding is the mathematical limit that can be reached if it's calculated and reinvested into an account's balance over a theoretically infinite number of periods. The formula is expressed as;

F.V=P.V×e^(i×t)

where;

F.V=future value

P.V=present value

e=mathematical constant approximated as 2.7183

i=stated interest rate

t=time in years

In our case;

F.V=$4,300

P.V=unknown

e=2.7183

i=5.7%=5.7/100=0.057

t=3 years

replacing;

4,300=P.V×e^(0.057×3)

4,300=P.V×e^(0.171)

1.1865 P.V=4,300

P.V=4,300/1.1865

P.V=3,624.13

The present value of $4,300=$3,624.13