Question

An athlete signs a contract that guarantees a ​$ 9​-million salary 6 yr from now. Assuming that money can be invested at 6.7​% with interest compounded​ continuously, what is the present value of that​ year's salary?

Answer 1

Answer:

$6,020,826.711

Step-by-step explanation:

The computation of the present value of that year salary is shown below:

As we know that

Present value in case of continuous compounding, the formula is

$= \frac{Guaranteed\ amount}{e^{0.067 \times 6}}$

where,

The Guaranteed amount is $9,000,000

The Time period is 6 years

And, the interest rate is 6.7%

Now placing these values

So, the present value is

$= \frac{\ 9,000,000}{e^{0.067 \times 6}}$

= $6,020,826.711