Find the principal needed now to get the given amount that i

Find the principal needed now to get the given amount; that is, find the present value. To get $90 after 3 years at 5% compounded continuously The present value of $90 is

Solution

Calculation Using the PV Formula

The present value formula for a single amount is:

PV= FV x [ 1 / (1+i)^n ]

here PV =present value

FV= future value

n = number of years

i = interest rate

FV=$90

n = 3 3/4

i=5% =0.05

PV =90 / (1+0.05)^15/4

PV= 90/(1.05)^15/4

PV= $75

present value is $75