Continual Interest

Question

A promissory note will pay 43000 at maturity 6 years from now. If you pay 24000 for the note now what rate compounded continuously would you earn?

Answer 1

Interest compounded continually fits the following equation: A = Pe^rt Where A is the amount at maturity, P is the initial investment, r is the annual interest rate, and t is the time in years.

So, 43000 = 24000e^6r

43000/24000 = e^6r

1.791667 = e^6r

ln(1.791667) = ln(e^6r)

0.583146 = 6r

r = 0.097191 = 9.7191%