Mike Gioulis would like to have $25,000 in 4 years to pay off a balloon payment on his business mortgage. His money market account is paying 1.825% compounded daily. Disregarding leap years, how much money must Mike put in his account now to achieve his goal? Round to the nearest whole dollar.

Answer 1

well, I can do it using daily but I bet continuous compounding will give the same answer to the nearest dollar :)
anyway daily interest = .01825/365
= 5 * 10^-5
number of periods = 365 * 4 = 1460

1 + 5*10^-5 = 1.00005
1.00005^1460 = 1.07573 note this multiplier
1.07573 x = 25,000
x = 23,240
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now just for fun if continuous
a = p e^rt
a = p e^(5*10^-5*1460)
a = p e^ (.073)
a = p (1.07573)
LOL see !

Answer 2

23,240

Answer 3

26000/ 1.0757285738 =

24,170