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svp [43]
3 years ago
11

Suppose you invest $1000 at an interest rate of 6%, compounded annually. Calculate the equivalent interest rate under continuous

compounding (find the interest rate r that would give the same result if interest were compounded continuously). Hint: You can consider the situation for 1 year (let t=1).
Business
1 answer:
Vikki [24]3 years ago
8 0

Answer:

The equivalent interest rate under continuous compounding is 5.8%

Explanation:

Annual compounding

A = P(1+r)^n

P = $1,000

r = 6% = 0.06

n = 1 year

A = 1000(1+0.06)^1 = 1000(1.06) = $1060

Continuous compounding

A = Pe^rt

A = $1060

P = $1000

t = 1 year

1060 = 1000e^r

e^r = 1060/1000 = 1.06

e^r = 1.06

r = ln 1.06 = 0.058 = 5.8%

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Deffense [45]

Answer:

$650,000

Explanation:

For computing the decrease in the  expected bankruptcy costs, first we have to determine the total firm value in each case which is shown below:

Total firm value = Equity + Debt × corporate tax rate

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Now the total firm value based on market share

= Equity + Debt

= 350,000 shares × $38 + $6,000,000

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3 years ago
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Vedmedyk [2.9K]

Answer:

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5 0
3 years ago
Had the government taken over the assets of Global Trading without compensation, and not taken over the assets of any other comp
AlladinOne [14]

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Explanation:

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3 0
3 years ago
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MariettaO [177]

Answer:

a M1 would not change.

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Answer:

A

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