Question

What would the value of an asset have to be now in order that it will grow to a value of $50,000 in 10 years if the value of the asset grows at 8% compounded continuously?

Answer 1

Answer: $ 22,466.45

Step-by-step explanation:

Given : Future value : $FV= \ 50,000$

The number of time period : $t=10\text{ years}$

The rate of interest : $r=8\ %=0.08$

Let P be the present value.

The formula to calculate the future value is given by :-

$FV=Pe^{rt}$

$50000=Pe^{0.08\times10}\\\\\Rightarrow\ 50000=P\times2.22554092849\\\\\Rightarrow\ P=\dfrac{50000}{2.22554092849}\\\\\Rightarrow\ P=22466.4482059\approx22,466.45$

Hence, the present value of asset would be $ 22,466.45.