You have your choice of two investment accounts. Investment A is a 14-year annui

Question

You have your choice of two investment accounts. Investment A is a 14-year annuity that features end-of-month $1,850 payments and has an interest rate of 8.2 percent compounded monthly. Investment B is a 7.7 percent continuously compounded lump sum investment, also good for 14 years. How much money would you need to invest in B today for it to be worth as much as Investment A 14 years from now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Amount needed $_________________

Explanation / Answer

FVA Of Investment A will be = $1,850* [{[1 + (0.082/12)]14* 12 -1}/(0.082/12)]

=$1850*313.1122 =$579,257.57

PV = $579,257.57 * e-1* 0.077 * 14 = $197,107.0992

Therefore the amount required will be =$197,107.0992

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