An investor has $10000 to invest in either a bond that matures in 5 years or a business that will produce a continuous stream of income over the next 5 years with a rate of flow f(t) = 2200. If both the bond and the continuous income stream earn 4%, compounded continuously, which is the better investment?
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The formula for calculating the future value of an investment with continuous compounding is given by: \[A = P \cdot e^{rt}\] Where: A = future value P = principal amount (initial investment) r = annual interest rate (in decimal form) t = time in years In this Show more…
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An investor has $5000 to invest in either a bond that matures in 5 years or a business that will produce a continuous stream of income over the next 5 years with a rate of flow f(t) equals 1000. If both the bond and the continuous stream earn 4%, compounded continuously, which is the better investment? What is the future value of the bond?
Sri K.
Unless stated to the contrary, compute all monetary answers to the nearest dollar: An investor has $\$ 10,000$ to invest in either a bond that matures in 5 years or a business that will produce a continuous stream of income over the next 5 years with rate of flow $f(t)=2,150 .$ If both the bond and the continuous income stream earn $3.75 \%$, compounded continuously, which is the better investment?
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Applications in Business and Economics
An investor has $8000 to invest in either a bond that matures in 4 years or a business that will produce a continuous stream of income over the next 4 years with rate of flow f(t) = 2000. If both the bond and the continuous stream earn 8%, compounded continuously, which is the better investment? What is the future value of the bond? (Round to the nearest dollar as needed.) What is the future value of the continuous income stream? (Round to the nearest dollar as needed.) Which is the better investment? A. The business is a better investment. B. The bond is a better investment. C. They are exactly the same, and will earn the same amount.
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