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Suppose that on January 1, 2018, you buy a bond for $2,000 that will pay interest of 3.6% per year compounded continuously for 20 years. You never withdraw any of the interest earned on the bond. (a) What will the bond be worth on January 1, 2038?

Respuesta :

JeanaShupp

Answer: $4108.87

Step-by-step explanation:

Given : Present value : [tex]P= \$2,000[/tex]

The number of time period : [tex]t=20\text{ years}[/tex]

The rate of interest : [tex]r=3.6\%\ =0.036[/tex]

Let P be the present value of bond .

The formula to calculate the future value is given by :-

[tex]FV=Pe^{rt}[/tex]

[tex]\\\\\Rightarrow\ FV=2000e^{0.036\times20}}\\\\\Rightarrow\ FV=4108.86642129\approx4108.87[/tex]

Hence, the future value of the bond on January 1, 2038 would be $4108.87 .

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