Question Nine Mr West decides to deposit $5000 in a BankEast Ltd account that pays 8% p.a....

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Finance

Question Nine
Mr West decides to deposit $5000 in a BankEast Ltd accountthat pays 8% p.a. continuously compounded. What will be his accountbalance in five years?
Question Ten
Norton Industries Pty Ltd is looking at investing in ProjectX that is expected to generate the following cash flows each yearfor six years.
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
$1 million
$1.5 million
$2 million
$2.5 million
$3 million
$3.5 million
Suppose similar investments are paying a return of 10% pacompounded semi-annually. How much should the Project X cost NortonIndustries?
Please show works, don't use excel.

Answer & Explanation Solved by verified expert

3.7 Ratings (542 Votes)

9We need to use the future value for continuous compounding of the initial amount formula as follows ie FVPenr where FVFuture Value or balance in the ac at end of 5 yrs Pthe Principal 5000 eis the See Answer

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Year 0	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6
	$1 million	$1.5 million	$2 million	$2.5 million	$3 million	$3.5 million