1. Continuously compounded interest

What is the present value of $10,000 over a 5 year period of time if interest is compounded continuously at an annual rate of 7%? *********** From what I understand, the formula is P = Be^-rt So... 10,000 = Be^-.07(5) 10,000 = Be^-.35 Do I divide 10,000 by the value of e^-.35? Could you give me some calculator hints? 2. Originally Posted by confusedagain What is the present value of$10,000 over a 5 year period of time if interest is compounded continuously at an annual rate of 7%?

***********
From what I understand, the formula is P = Be^-rt
So...
10,000 = Be^-.07(5)
10,000 = Be^-.35

Do I divide 10,000 by the value of e^-.35?
Could you give me some calculator hints?
Hello,

your considerations are OK (and I hope for you that you know why you should use this formula )

From

10,000 = Be^(-.07*(5)) you get: B = 10,000 / (e^(-0.35) = 10,000 * e^(0.35) ≈ \$14,190.67

EB

3. My answer doesn't match yours

I must be doing something incorrectly. I may not be using the calculator in the right way. I am coming up with e^.35 = 0.692506438. Multiplying that by 10,000 is giving me 14,303.687, rounded up to 14,303.69.

4. Originally Posted by confusedagain
I must be doing something incorrectly. I may not be using the calculator in the right way. I am coming up with e^.35 = 0.692506438. Multiplying that by 10,000 is giving me 14,303.687, rounded up to 14,303.69.
I don't know what you are doing. First off, if e^(0.35) gave you 0.692506438 (which it shouldn't), if you multiplied that by 10000 you would get 6925.06 not 14,303.69.

earboth's calculations are correct. what kind of calculator do you have?

5. Sorry, I figured it out

I was using the wrong key...I was using y^x instead of e^x

6. Originally Posted by confusedagain
I was using the wrong key...I was using y^x instead of e^x
ok, so you got it now?

7. Got it

I got it now...I am using a scientific calculator (drug store brand CVS). When I started this course, they said calculators wouldn't be allowed for exams...so I have never really learned how to use this type of calculator and of course, since it was borrowed, I don't have the instruction book.