Question

Income Suppose income from an endowment is generated at the annual rate of $42,000 per year. Find the capital value of this endowment at an interest rate of 7.5% compounded continuously.

Answer 1

Answer:

Capital value after 1 year will be equal to $45150

Step-by-step explanation:

We have given principal amount P = $42000

Rate of interest r = 7.5 %

Time t = 1 year

Capital value is given by $A=P(1+\frac{r}{100})^n$

So $A=42000\times (1+\frac{7.5}{100})^1$

$A=42000\times 1.075=45150$

So capital value after 1 year will be equal to $45150