(1) You have $10,000 to invest for 10 years, and you are given 2 choices: (1)...

 

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(1) You have $10,000 to invest for 10 years, and you are given 2 choices: (1) Receive interest at a continuously compounded rate of (0) = 11%, or (II) Receive interest at an annual compounded rate of f(¹) = 12%. Which is better and by how much? Future shop is offering a special deal on TVs. If you buy today, you don't need to make any payments for one year. Starting one year from today, you must make 12 monthly payments of $200. (So the first payment is one year from today, and the second one, 1 month later.) If interest rates are (12) = 12%, what is the purchase price of the TV? (1) You have $10,000 to invest for 10 years, and you are given 2 choices: (1) Receive interest at a continuously compounded rate of (0) = 11%, or (II) Receive interest at an annual compounded rate of f(¹) = 12%. Which is better and by how much? Future shop is offering a special deal on TVs. If you buy today, you don't need to make any payments for one year. Starting one year from today, you must make 12 monthly payments of $200. (So the first payment is one year from today, and the second one, 1 month later.) If interest rates are (12) = 12%, what is the purchase price of the TV?

Answer rating: 100% (QA)

In order to determine which investment choice is better we can compare the future values of the inve... View the full answer