Suppose you want to invest $1,000 today in a project. You have the following investment options to
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Suppose you want to invest $1,000 today in a project. You have the following investment options to pick from, Option 1: invest $1,000 for 7.5 years at 6.5% annually compounded rate in firm A and option 2: invest $1,000 for 8 years at 5% continuously compounded rate in firm B. 1. How much will you make if you invested in firm A and firm B respectively?
2. Given that investors prefer continuously compounded rates, based on your results in "c(i)" which of the two investment options would you pick and why?
Related Book For
Foundations of Finance The Logic and Practice of Financial Management
ISBN: 978-0132994873
8th edition
Authors: Arthur J. Keown, John D. Martin, J. William Petty
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