Suppose that we want a certain endowment to pay 50,000 dollars in cash ten years from now. The endowment will be set up today with 5,000 dollars principal and locked in at a fixed interest rate. What interest rate (compounded continuously) is needed to guarantee the desired payoff?
I know that Amount = P(1+(r/100n)^(10n) but I can't figure out the rate.
You have the wrong formula if the principle is compounded continuously. The correct formula is
where t is the number of years, A is the amount after time t, is the initial invetsment and r is the annual interest rate.
Substitute the given values for t, A and and solve for r.