Problem

Use a numerical integration command on a graphing calculator. Find the future value at $9.75 \%$ interest, compounded continuously for 8 years, of the continuous income stream with the rate of flow function $f(t)=-625 t+10,000$. The future value of the income stream at $9.75 \%$ compounded continuously at the end of 8 years is $\$ \square$. (Round to the nearest dollar as needed.)

Solution

Step 1 :Given the future value of a continuous income stream is calculated by the formula: \[ FV = \int_0^T e^{r(T-t)}f(t) dt \] where: \( FV \) is the future value of the income stream, \( T \) is the time horizon (in this case, 8 years), \( r \) is the interest rate (in this case, 9.75% or 0.0975 in decimal form), and \( f(t) \) is the rate of flow function (in this case, \( -625t + 10000 \)).

Step 2 :We can use numerical integration to calculate the integral.

Step 3 :The result of the calculation is 94781.

Step 4 :So, the future value of the income stream at $9.75 \%$ compounded continuously at the end of 8 years is \(\boxed{94781}\).

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Source: https://solvelyapp.com/problems/42499/

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