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Latoya wants to buy a bond that will mature to\$4500 in six years. How much should she pay for the bond now if it earns interest at a rate of 3.5% per year, compounded continuously?

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Solution

Latoya wants to buy a bond that will mature to$4500 in six years. How much should she pay for the bond now if it earns interest at a rate of 3.5% per year, compounded continuously?

Solution

Principal : 3647.63

Solution steps

Translate the problem into an equation:

4500 = P e^{0.035 \cdot 6}

Solve for

P, 4500 = P e^{0.035 \cdot 6} : P = 3647.63

Principal : 3647.63

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