Question

An author is to be paid royalties for publishing a book. She has two options: (a) She can be paid $21,000 immediately, or (b) She can receive 5 equal annual payments of $4600, the first payment taking place immediately. Assuming that the annual interest rate is 6% compounded annually, which option should she choose? You must justify your answer in order to receive full credit. You have a continuous income stream with income rate of $1000t dollars per year for 4 years. Assume an interest rate of 5%, compounded continuously. Calculate the present value of this income stream.

          An author is to be paid royalties for publishing a book. She has two options: (a) She can be paid $21,000 immediately, or (b) She can receive 5 equal annual payments of $4600, the first payment taking place immediately. Assuming that the annual interest rate is 6% compounded annually, which option should she choose? You must justify your answer in order to receive full credit. You have a continuous income stream with income rate of $1000t dollars per year for 4 years. Assume an interest rate of 5%, compounded continuously. Calculate the present value of this income stream.

An author is to be paid royalties for publishing a book. She has two options: (a) She can be paid 21,000 immediately, or (b) She can receive 5 equal annual payments of4600, the first payment taking place immediately. Assuming that the annual interest rate is 6% compounded annually, which option should she choose? You must justify your answer in order to receive full credit. You have a continuous income stream with income rate of $1000t dollars per year for 4 years. Assume an interest rate of 5%, compounded continuously. Calculate the present value of this income stream.

Added by Austin H.

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