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Mathematics

Question

How much money must be deposited today to become ​$1300 in 20 years at 7.5% compounded​ continuously?

1 Answer

  • Use the formula for Amount for continuous compounding:

    A = Pe^(rt)

    Here A = $1300, r = 0.075 and t = 20 yrs.  Thus,

    1300 = P*e^(0.075*20), or    1300 = P (4.482).
                                       $1300
    Solving for P:  P = ----------------- = $290.07  (answer)
                                       4.482