Web Appendix 05A: Continuous Compounding and Discounting
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1. If you receive $15,000 today and can invest it at a 8.00% annual rate compounded continuously, what will be your
ending value after 20 years?
a. $63,894.12
b. $56,464.57
c. $74,295.49
d. $92,869.36
e. $80,982.08
2. In six years’ time, you are scheduled to receive money from a trust established by your grandparents. When the trust
matures there will be $100,000 in the account. If the account earns 10.50% compounded continuously, how much is in the
account today?
a. $66,573.98
b. $45,270.30
c. $56,454.73
d. $53,259.18
e. $55,389.55
Web Appendix 05A: Continuous Compounding and Discounting
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7. You place $1,000 in an account that pays 7.00% interest compounded continuously. You plan to hold the account
exactly 3 years. Simultaneously, in another account you deposit money that earns 5.20% compounded semiannually. If the
accounts are to have the same amount at the end of the 3 years, how much of an initial deposit do you need to make now
in the account that pays 5.20% interest compounded semiannually? Do not round your intermediate calculations.
a. $1,025.86
b. $803.77
c. $1,057.59
d. $1,290.26
e. $835.50
8. For a 10-year deposit, what annual rate payable semiannually will produce the same effective rate as 5.75%
compounded continuously? Do not round your intermediate calculations.
a. 5.43%
b. 5.83%
c. 6.53%
d. 6.88%
e. 4.38%
Web Appendix 05A: Continuous Compounding and Discounting
Copyright Cengage Learning. Powered by Cognero.
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