Solution-Compounding and a prevailing interest rate

Compounding and a prevailing interest rate

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The value of good wine increases with age. Thus if you are a wine dealer, you have the problem of deciding whether to sell you wine now, at a price of $P a bottle, or sell it later at a higher price. Suppose you know that the amount a wine-drinker is willing to pay for a bottle of wine t years from now is $P(1+20(sqr(t))). Assuming continuous compounding and a prevailing interest rate of 5% per year, when is the best time to sell your wine?

Reference no: EM13961460

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Compounding and a prevailing interest rate

Reference no: EM13961460

Reference no: EM13961460

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