Following the birth of a child, a parent wants to make an initial investment P 0 that will grow to $70,000 for the child's education at age 19. Interest is compounded continuously at 6%.

Question

Following the birth of a​ child, a parent wants to make an initial investment P 0 that will grow to ​$70,000 for the​ child's education at age 19. Interest is compounded continuously at 6​%.
What should the initial investment​ be? Such an amount is called the present value of ​$70,000 due 19 years from now.

Reiny · Accepted Answer

x e^.06t = 70000 x = 70000/e^(.06(19)) = 22,387.33

Following the birth of a​ child, a parent wants to make an initial investment P 0 that will grow to ​$70,000 for the​ child's education at age 19. Interest is compounded continuously at 6​%.

Following the birth of a child, a parent wants to make an initial investment P 0 that will grow to $70,000 for the child's education at age 19. Interest is compounded continuously at 6%.