The rate of a continuous money flow starts at $1000 and increases exponentially at 3% per year for 5 years. Find the present value and final amount if interest earned is 4% compounded continuously.
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Given: Initial cash flow (P) = $1000 Annual interest rate (r) = 3% = 0.03 Time (t) = 5 years The present value formula for continuous compounding is: \[ PV = P \times e^{rt} \] Substitute the values: \[ PV = 1000 \times e^{0.03 \times 5} \] \[ PV = 1000 \times Show more…
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