You have your choice of two investment accounts. Investment A is a 15-year annuity that features end-of-month $1,500 payments and has an interest rate of 8.7 percent compounded monthly. Investment B is an 8 percent continuously compounded lump-sum investment, also good for 15 years. How much money would you need to invest in B today for it to be worth as much as Investment A 15 years from now?
You have your choice of two investment accounts. Investment A is a 15-year annuity that features end-of-month $1,500 payments and has an interest rate of 8.7 percent compounded monthly. Investment B is an 8 percent continuously compounded lump-sum investment, also good for 15 years. How much money would you need to invest in B today for it to be worth as much as Investment A 15 years from now?
Foundations of Business - Standalone book (MindTap Course List)
4th Edition
ISBN:9781285193946
Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor
Publisher:William M. Pride, Robert J. Hughes, Jack R. Kapoor
Chapter15: Using Management And Accounting Information
Section: Chapter Questions
Problem 5DQ
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You have your choice of two investment accounts.
Investment A is a 15-year annuity that features end-of-month $1,500 payments
and has an interest rate of 8.7 percent compounded monthly. Investment B is an
8 percent continuously compounded lump-sum investment, also good for 15 years.
How much money would you need to invest in B today for it to be worth as much as
Investment A 15 years from now?
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