Chapter 5.7, Problem 52AYU

To determine

To find: Comparing Two Alternatives Suppose that April has access to an investment that will pay $10\%$ interest compounded continuously. Which is better: to be given $\$1000$ now so that she can take advantage of this investment opportunity or to be given $\$1325$ after 3 years?

Answer to Problem 52AYU

Solution:

Now $\$1000$ to be given is better.

Explanation of Solution

Given:

$P=\$1000, r=10\%=0.1$

Calculation:

$A=P{e}^{rt}$

$A=1000e^{0.1\left(3\right)}$

$A=1000e^{0.3}$

$=1349.86$

Now $\$1000$ to be given is better, because after 3 years he receive $1349.86$ which is more than $\$1325$.