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Comparing Two Alternatives Suppose that April has access to an investment that will pay 10% interest compounded continuously. Which is better: to be given $1000 now so that she can take advantage of this investment opportunity or to be given $1325 after 3 years?

Comparing Two Alternatives Suppose that April has access to an investment that will pay 10% interest compounded continuously. Which is better: to be given $1000 now so that she can take advantage of this investment opportunity or to be given $1325 after 3 years?

Calculus: Early Transcendentals
Calculus: Early Transcendentals
8th Edition
ISBN:9781285741550
Author:James Stewart
Publisher:James Stewart
Chapter1: Functions And Models
Section: Chapter Questions
Problem 1RCC: (a) What is a function? What are its domain and range? (b) What is the graph of a function? (c) How...
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I need help with number 52
**Section 4.7: Financial Models** Page 347 **51. Comparing IRA Investments** Will invests $2000 in his IRA in a bond trust that pays 9% interest compounded semiannually. His friend Henry invests $2000 in his IRA in a certificate of deposit that pays \(8\frac{1}{2}\%\) compounded continuously. Who has more money after 20 years, Will or Henry? **52. Comparing Two Alternatives** Suppose that April has access to an investment that will pay 10% interest compounded continuously. Which is better: to be given $1000 now so that she can take advantage of this investment opportunity or to be given $1325 after 3 years? **53. College Costs** The average annual cost of college at 4-year private colleges was $29,056 in the 2012–2013 academic year. This was a 4.2% increase from the previous year. *Source: The College Board* (a) If the cost of college increases by 4.2% each year, what will be the average cost of college at a 4-year private college for the 2030–2031 academic year? (b) College savings plans, such as a 529 plan, allow individuals to put money aside now to help pay for college later. If one such plan offers a rate of 4% compounded continuously, how much should be put in a college savings plan in 2015 to pay for 1 year of the cost of college at a 4-year private college for an incoming freshman in 2030? **54. Analyzing Interest Rates on a Mortgage** Colleen and Bill have just purchased a house for $650,000, with the seller holding a second mortgage of $100,000. They promise to pay the seller $100,000 plus all accrued interest 5 years from now. The seller offers them three interest options on the second mortgage: (a) Simple interest at 12% per annum
Transcribed Image Text:**Section 4.7: Financial Models** Page 347 **51. Comparing IRA Investments** Will invests $2000 in his IRA in a bond trust that pays 9% interest compounded semiannually. His friend Henry invests $2000 in his IRA in a certificate of deposit that pays \(8\frac{1}{2}\%\) compounded continuously. Who has more money after 20 years, Will or Henry? **52. Comparing Two Alternatives** Suppose that April has access to an investment that will pay 10% interest compounded continuously. Which is better: to be given $1000 now so that she can take advantage of this investment opportunity or to be given $1325 after 3 years? **53. College Costs** The average annual cost of college at 4-year private colleges was $29,056 in the 2012–2013 academic year. This was a 4.2% increase from the previous year. *Source: The College Board* (a) If the cost of college increases by 4.2% each year, what will be the average cost of college at a 4-year private college for the 2030–2031 academic year? (b) College savings plans, such as a 529 plan, allow individuals to put money aside now to help pay for college later. If one such plan offers a rate of 4% compounded continuously, how much should be put in a college savings plan in 2015 to pay for 1 year of the cost of college at a 4-year private college for an incoming freshman in 2030? **54. Analyzing Interest Rates on a Mortgage** Colleen and Bill have just purchased a house for $650,000, with the seller holding a second mortgage of $100,000. They promise to pay the seller $100,000 plus all accrued interest 5 years from now. The seller offers them three interest options on the second mortgage: (a) Simple interest at 12% per annum
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