Quote:
Originally Posted by ryandman89  A promissory not will pay $50,000 at maturity 5 years from now. The note has an interest rate of 6.4% compounded continuously...
1. What is the note worth right now?
2. You bought the note and cashed it after 5 years. How much interest did you earn?
I set up the equation as 50,000=Ce^.064*0 but how do I solve that and then I have no idea how do do the second part of the question...PLEASE HELP! |
The equation you require is that:
V(t)=Ce^{0.064 t},
where t is in years. So in this case:
C = 50000/e^{0.064*5}.
The interest paid is 50000 - C.
RonL