You have your choice of two investment accounts.Investment A is a 5-year annuity that features end-of-month $2,500 payments and has an interest rate of 11.5 percent compounded monthly.Investment B is a 10.5 percent continuously compounded lump sum investment,also good for five years.How much would you need to invest in B today for it to be worth as much as investment A five years from now?

Question

Quizplus · Accepted Answer

FVA = $2,500 × [{[1 + (0.115/12)]⁵ ^{× 12} -1}/(0.115/12)] = $201,462.23PV = $201,462.23 e^-1 ^{× 0.105} ^×5 = $119,176.06

You Have Your Choice of Two Investment Accounts