Question

Environmental recovery company RexChem Partners plans to finance a site reclamation project that will require a 4-year cleanup period. If the company borrows $4.1 million now, how much will the company have to get at the end of each quarter in order to earn 15% per year, compounded weekly on its investment?

Answer 1

Answer:

728,839.57883 per quarter.

Explanation:

1. Effective Annual Rate = 10%

Effective rate continuously compounded = eln(1+r) - 1

ln(1.1) = 0.09531018

Montly rate = 0.09531018/12 = 0.07942515

e0.07942515 -1 = 0.00797414

Hence, monthly continuous rate =

0.797414%

2. Effective Quarterly rate

= (1+(Rate per year/52))Number of weeks

=(1+Rate per quarter)4,

(1+(0.15/52))208=(1+r)4,

r = 16.1583394% per quarter

Now, using the PMT function in excel,

=PMT(16.1583394%,16,-4100000)

728,839.57883

per quarter

Therefore In order to earn 15% per year compounded weekly on its investment at the end of each quarter, the company will have to get $728,839.57883