Results 1 to 7 of 7

Math Help - Continuously compounded interest

  1. #1
    Newbie
    Joined
    Oct 2006
    Posts
    18

    Post 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?
    Follow Math Help Forum on Facebook and Google+

  2. #2
    Super Member
    earboth's Avatar
    Joined
    Jan 2006
    From
    Germany
    Posts
    5,829
    Thanks
    123
    Quote Originally Posted by confusedagain View Post
    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
    Follow Math Help Forum on Facebook and Google+

  3. #3
    Newbie
    Joined
    Oct 2006
    Posts
    18

    Exclamation 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.
    Follow Math Help Forum on Facebook and Google+

  4. #4
    is up to his old tricks again! Jhevon's Avatar
    Joined
    Feb 2007
    From
    New York, USA
    Posts
    11,663
    Thanks
    3
    Quote Originally Posted by confusedagain View Post
    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?
    Follow Math Help Forum on Facebook and Google+

  5. #5
    Newbie
    Joined
    Oct 2006
    Posts
    18

    Sorry, I figured it out

    I was using the wrong key...I was using y^x instead of e^x
    Follow Math Help Forum on Facebook and Google+

  6. #6
    is up to his old tricks again! Jhevon's Avatar
    Joined
    Feb 2007
    From
    New York, USA
    Posts
    11,663
    Thanks
    3
    Quote Originally Posted by confusedagain View Post
    I was using the wrong key...I was using y^x instead of e^x
    ok, so you got it now?
    Follow Math Help Forum on Facebook and Google+

  7. #7
    Newbie
    Joined
    Oct 2006
    Posts
    18

    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.
    Follow Math Help Forum on Facebook and Google+

Similar Math Help Forum Discussions

  1. Differential Equation for Continuously Compounded Interest
    Posted in the Differential Equations Forum
    Replies: 3
    Last Post: March 14th 2011, 04:53 AM
  2. Continuously Compounded Interest
    Posted in the Business Math Forum
    Replies: 1
    Last Post: September 30th 2010, 01:59 PM
  3. Replies: 0
    Last Post: July 12th 2010, 08:11 PM
  4. Interest Compounded Continuously
    Posted in the Pre-Calculus Forum
    Replies: 4
    Last Post: November 9th 2009, 01:31 PM
  5. Compounded continuously
    Posted in the Calculus Forum
    Replies: 1
    Last Post: May 6th 2008, 08:13 PM

Search Tags


/mathhelpforum @mathhelpforum