Chau wants to buy a bond that will mature to 5000 in eight years. How much should he pay for the bond now if it earns interest at a rate of 3.5% per year, compounded continuously?

Solution

Solution

Principal : 3778.92

Solution steps

Translate the problem into an equation:

5000 = P e^{0.035 \cdot 8}

Solve for

P, 5000 = P e^{0.035 \cdot 8} : P = 3778.92

Principal : 3778.92

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