Saturday

August 23, 2014

August 23, 2014

Posted by **nic** on Thursday, September 16, 2010 at 5:10pm.

$3000 a year from now, and $3450 two years from now.

Choice 2: Three yearly payments of $ 3000 starting now.

Interest is compounded continuously.

(a) If the interest rate on savings were 4.76 %,which would you prefer?

(b) What is the interest rate that would make both choices equally lucrative?

- calculus -
**bobpursley**, Thursday, September 16, 2010 at 6:25pmThis is not the calculus I know.

Working present value;

Option 1

PV=2600+3000/(1+i) + 3450/(1+i)^2

calculate that with i=.0476

Option 2

PV=3000+3000/(1+i) + 3000/(1+i)^2

calculate that

which is the lower PV? That is the prefered option.

**Related Questions**

Math - Marvin was supposed to make three payments of $2000 each—the first one ...

Compound Interest! - Two payments of $10,000 and $12,000 must be made 1 year and...

finance - A 5-year annuity of ten $4500 semiannual payments will begin 9 years ...

finance - Can someone please help me with the following question. I am not sure ...

finance - I'm not sure how to approach this problem What is the fair value of a ...

Finance - What is the economic value today of each of the following payment ...

math - Jungle Jim owes three debts: $500 due in one year plus interest at 6% ...

Math - Jungle Jim owes three debts: $500 due in one year plus interest at 6% ...

economics - Determine the sum of money that must be invested today at 9% ...

Finance - Mary and Joe would like to save up $10,000 by the end of three years ...