Boris wants to buy a bond that will mature to 6500 in seven years. How much should he pay for the bond now if it earns interest at a rate of 4% per year, compounded continuously?

Solution

Solution

Principal : 4912.59

Solution steps

Translate the problem into an equation:

6500 = P e^{0.04 \cdot 7}

Solve for

P, 6500 = P e^{0.04 \cdot 7} : P = 4912.59

Principal : 4912.59

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