calculus

posted by .

Choice 1: Payments of $ 2600 now,
$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 -

    This 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.

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. finance

    Can someone please help me with the following question. I am not sure even where to start. A 5-year annuity of 10 $9,000 seminannual payments will begin 9 years from now, with the first payment coming 9.5 years from now. If the discount …
  2. Compound Interest!

    Two payments of $10,000 and $12,000 must be made 1 year and 4 years from now. If money can earn 9% compounded monthly, what single payment 2 years from now would be equivalent to the two scheduled payments?
  3. finance

    A 5-year annuity of ten $4500 semiannual payments will begin 9 years from now, with the first payment coming 9.5 years from now. If the discount rate is 12% compounded monthly, what is the value of this annuity five years from now?
  4. Math

    Jungle Jim owes three debts: $500 due in one year plus interest at 6% compounded semi-annually, $2000 due in two years, $1000 due in three years plus interest at 5% compounded monthly. He wishes to discharge these debts by paying $500 …
  5. math

    Jungle Jim owes three debts: $500 due in one year plus interest at 6% compounded semi-annually, $2000 due in two years, $1000 due in three years plus interest at 5% compounded monthly. He wishes to discharge these debts by paying $500 …
  6. Math

    Marvin was supposed to make three payments of $2000 each—the first one year ago, the second one year from now, and the third three years from now. He missed the first payment and proposes to pay $3000 today and a second amount in …
  7. Math

    Choice 1: Payments of $ 2600 now, $ 3200 a year from now, and $ 3880 two years from now. Choice 2: Three yearly payments of $ 3200 starting now. Modification: Interest is compounded continuously instead of annually. (a) If the interest …
  8. calculus

    Choice 1: Payments of $ 2600 now, $ 3200 a year from now, and $ 3880 two years from now. Choice 2: Three yearly payments of $ 3200 starting now. Modification: Interest is compounded continuously instead of annually. (a) If the interest …
  9. Calculus

    You need $12,000 in your account 5 years from now and the interest rate is 6% per year, compounded continuously. How much should you deposit now?
  10. accounting

    rylie owes $3000 now and $2000 in 4 months. After re - arrangement of payments, he agreed to pay $x in 6 months and $2x in 8 months from now. Determine the value of the $x using now as the focal date and the simple interest rate at …

More Similar Questions