Basic future values

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Chapter 2 Questions, Edition 11

Continuous compounding How much will you have at the end of 20 years if you invest $100 today at 15% annually compounded? How much will you have if you invest at 15% continuously compounded?

27.	Perpetuities You have just read an advertisement stating, “Pay us $100 a year for 10 years and we will pay you $100 a year thereafter in perpetuity.” If this is a fair deal, what is the rate of interest?
28.	Compounding intervals Which would you prefer? An investment paying interest of 12% compounded annually. An investment paying interest of 11.7% compounded semiannually. An investment paying 11.5% compounded continuously. Work out the value of each of these investments after 1, 5, and 20 years.

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