Understanding Accumulated Present Value

The video tutorial explains how to calculate the accumulated present value of an investment with a continuous money flow of $4,800 per year over a 10-year period at a 2% continuously compounded interest rate. It involves setting up and solving an integral using u-substitution to find the present value, which is the amount needed today to match the future value of the continuous cash flow. The tutorial also compares the present value to the future value, providing a practical understanding of the concept.

What is the main goal when finding the accumulated present value in an investment?

• To determine the future value of the investment.

• To assess the risk associated with the investment.

• To find the one-time investment needed today to match a continuous money flow.

• To calculate the total interest earned over the investment period.

What is the interest rate used in the problem statement?

• 4% compounded quarterly

• 2% compounded continuously

• 3% compounded annually

• 5% compounded monthly

Which mathematical method is used to solve the problem of accumulated present value?

• Probability theory

• Integration

• Matrix algebra

• Differentiation

What is the purpose of performing a U substitution in this problem?

• To find the derivative of the function

• To determine the interest rate

• To calculate the future value

• To simplify the integration process

What is the expression for the differential of U in the U substitution?

• 0.02DT

• -0.02DT

• -0.002DT

• 0.002DT

What is the antiderivative of e to the power of U?

• e to the power of U

• U times e

• e divided by U

• U to the power of e

What is the calculated present value rounded to the nearest penny?

• $50,000.00

• $43,504.62

• $45,000.00

• $53,136.66

What is the future value of the continuous cash flow?

• $50,000.00

• $45,000.00

• $53,136.66

• $43,504.62

Why is it important to calculate the present value in this context?

• To calculate the annual return rate

• To assess the risk of the investment

• To know how much to invest today to achieve a future goal

• To determine the total interest earned

What does the present value tell us about the investment?

• The annual return rate

• The risk level of the investment

• The total interest earned over 10 years

• The amount needed today to match a future account balance