Exercise IV (20 + 20 = 40 points) 1. Suppose you are presented with a choice of two investments: one in a preexisting coffee shop,
Exercise IV (20 + 20 = 40 points) 1. Suppose you are presented with a choice of two investments: one in a preexisting coffee shop, or a new one. Each choice requires the same initial amount and generates a continuous income stream of 4%, compounded continuously. The rate of flow from the preexisting coffee shop is constant at $12, 000 per year whereas that from the new one is expected to follow the model $10, 000e0.05t per year where t is the time elapsed in years. Which is the better choice over the next 5 years
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