Find the accumulated present value of an investment over a 7 year period if there is a continuous money flow of
Step 1 :We are given a continuous money flow of $8,000 per year for a 7 year period and an interest rate of 1.9% compounded continuously. We are asked to find the accumulated present value of this investment.
Step 2 :We can use the formula for the present value of a continuous income stream to solve this problem. The formula is:
Step 3 :Substituting the given values into the formula, we get:
Step 4 :Calculating the present value, we get:
Step 5 :This value represents the total amount of money that would need to be invested today, at an interest rate of 1.9% compounded continuously, to generate a continuous income stream of $8,000 per year for 7 years.
Step 6 :