Question: 2. You know that in continuous compounding, the future value of a current lump sum (of money) is compounded as: FV=PV*e^Rn, with R the annualized

2. You know that in continuous compounding, the future value of a current lump sum (of money) is compounded as: FV=PV*e^Rn, with R the annualized interest rate and n the number of years. Now suppose you win a lottery that gives you 1 million dollars. But you can either get it now and pay 50% tax (ie. Get 500,000 only) , or get it in 10 years and pay 30% tax (ie. Get $ 700,000 in 10 years), which one will you choose? Why? The interest rate is 4%.

3. What is the equivalent continuous compounding rate for an 8% quarterly compounding investment?

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