concom2

# concom2 - 8(10 marks The three following investments are...

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7. (10 marks) The three following investments are unrelated (thus, each part of this question will be marked entirely independently) . Each of the following three investments has a continuously compounded rate of return of 8% per annum. (i) Invest \$105 today and receive one payment of \$A in exactly 37 months. (ii) Invest \$10,000 today and receive \$A per month indefinitely with the first such amount exactly one month from today. (iii) Invest \$5,000 today and receive quarterly payments indefinitely. The payments grow at the rate of 1% per quarter. In other words, each payment is 1% greater than the previous. The first payment is \$A and will be received exactly one quarter from today. In each of the three above cases, determine the amount \$A.
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Unformatted text preview: 8. (10 marks) The three following investments are unrelated (thus, each part of this question will be marked entirely independently) . Find the per annum rate of return continuously compounded for each of the following investments. (iv) Invest \$105 today and receive one payment of \$220 in exactly 37 months. (v) Invest \$10,000 today and receive \$90 per month indefinitely, with the first payment immediately received. (vi) Invest \$5,000 today and receive payments every quarter indefinitely. The payments grow at the rate of 2% per quarter. In other words, each payment is 2% greater than the previous. The first payment is \$100 and will be received immediately....
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