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What is the future value of Investment A

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Question - You have your choice of two investment accounts. Investment A is a 20-year annuity that features end-of-month NKr12,000 payments and has an interest rate of 6 per cent compounded monthly. Investment B is an 8 per cent continuously compounded lump sum investment, also good for 15 years. How much money would you need to invest in B today for it to be worth as much as investment A 20 years from now?

(i) What is the future value of Investment A?

(ii) If Investment B is compounded on monthly basis, How much money would you need to invest in B today for it to be worth as much as investment A 20 years from now?

(iii) Find the maximum value of effective annual rate (EAR) of investment B. Apply this rate for investment B and find out How much money would you need to invest in B today for it to be worth as much as investment A 20 years from now?

Reference no: EM133099627

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