Present value of a single deposit, compounded continuously – How do you find it?
The present value of one amount is an investment that is worth a specified amount in the future. For example, if you invested $1,000 today with an interest rate of 12%, it would be worth $2,000 in 5 years.
Present value of a single deposit, compounded continuously – How do you find it?
PV = FV / (1 + r / n)nt
PV = Present value. FV = Future value. r = Rate of interest (percentage ÷ 100) n = Number of times the amount is compounding.
Present value of a single deposit, compounded continuously – How do you find it?
Example
Find the value after 55 years of an investment that’s worth \$ 1,500$1,500 right now, if the interest rate is 6\%6% compounded continuously.
Here’s what we know.
PV=1,500PV=1,500
r=0.06r=0.06
t=5t=5
Plugging these into the future value equation for interest compounded continuously for a single deposit, we get
FV=1,500e^{(0.06)(5)}FV=1,500e
(0.06)(5)
FV=2,024.79FV=2,024.79
The value of the account after 55 years is \$2,024.79$2,024.79.