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The question asks for the present value of an investment that will yield USD 25,000 in five years, with a continuously compounded interest rate of 2.5% per annum. The user seems to have entered USD 22,062.50 as their answer.

We can solve this using the formula for continuously compounded interest:

\[
PV = FV \times e^{-rt}
\]

Where:
- \(PV\) is the present value (what we are solving for),
- \(FV = 25,000\) USD (future value),
- \(r = 0.025\) (interest rate per year),
- \(t = 5\) years,
- \(e\) is Euler's number (approximately 2.71828).

Let me calculate the exact present value.The calculated present value of the investment is approximately USD 22,062.42, correct to two decimal places.

The answer of USD 22,062.50 entered in the image is slightly off but very close to the correct result.

Would you like more details or have any questions?

Here are 5 related questions to deepen your understanding:
1. How does continuously compounded interest differ from simple or periodic compound interest?
2. What happens to the present value if the interest rate is increased or decreased?
3. Can this formula be used for investments with varying interest rates over time?
4. How would the formula change if the compounding were done quarterly instead of continuously?
5. How can you estimate future values from present values using this model?

**Tip:** Continuously compounded interest provides the smallest present value compared to other compounding methods for the same interest rate and time period.

Suppose that five years from now, you will receive USD 25,000 from investing your money at the continuously compounded interest rate of 2.5% per annum. What is the present value of this investment correct to two decimal places?

Learn how to calculate the present value of an investment of USD 25,000 with a continuously compounded interest rate of 2.5% over five years. Using the formula PV = FV × e^(-rt), this problem is ideal for students studying finance or advanced math.

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