1. Continuously compounded formula is given by:
A=Pe^rt
Thus given:
P=$6200, r=0.09, t=20 years:
A=6200e^(0.09*20)
A=37,507.81
Answer: c] $37507.81
2. Compound interest formula is given by:
A=p(1+r/100n)^(nt)
where: n=number of terms, p=principle, t=time, r=rate
Plugging the values in the formula we get:
A=2600(1+4.25/4*100)^(4*5)
simplifying this we get:
A=$3211.99
Answer: b)$3211.99
3. Using the formula from (2) we have:
A=P(1+r/100n)^nt
plugging in the values we get:
A=2600(1+4.25/400)^(50*4)
Simplifying the above we get:
A=$21526.87
Answer:
A] $21,526.87
4. The price of stock when the bond is worth $68.74 will be:
let the bond price be B and Stock price be S
thus
S=k/B
where
k is the constant of proportionality
thus
k=SB
hence
when S=$156 and B=$23
then
K=156*23
K=3588
thus
S=3588/B
hence
the value of S when B=$68.74
thus
S=3588/68.74
B=52.19668~52.20
Answer: d] $52.20
5. Continuously compounded annuity is given by:
FV =CF×[(e^rt-1)/(e^r-1)]
plugging in the values we get:
FV=500×[(e^(6*0.08)-1)/(e^0.06-1)]
simplifying this we get:
FV=$3698.50