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Question 2 Notation: The time index a runs from t to T.

Question 2

Notation: The time index a runs from t to T.

t ............... a ............... T

a) Suppose an investment produces a continuous stream of income over 10 years at a rate of

$20,000 per year and the interest rate is 6% per year, continuously compounded. Determine

the present value.

b) Determine the rate of increase in the value of the investment project if its life is extended by

an instant, dP/dT.

c) What is the present value in question (a) if the stream of income lasts forever?

Top Answer

a. $150,369.12... View the full answer


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