What is the interest rate that would make both choices equally lucrative?

label Calculus
account_circle Unassigned
schedule 1 Day
account_balance_wallet $5

Choice 1: Payments of $ 2650 now, $ 3200 a year from now, and $ 3820 two years from now. 

Choice 2: Three yearly payments of $ 3200 starting now. 
Modification: Interest is compounded continuously instead of annually. 

Oct 3rd, 2015

Thank you for the opportunity to help you with your question!

3200+3200/e^d+3200/e^2d = 2650+3200/e^d+3820/e^2d

550 = 620/e^2d

e^2d =620/550 = 62/55 = 1.1273

d = 1/2 ln1.1273

=0.05991



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Sep 21st, 2015

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