Q.1

A. The value of crockery that increase with time is given by

V = 200(1.7)

t

2

5

. If the cost of capital under continuous compounding rate is 7 percent in a year

and there is no storage cost then how long should the factory can store the crockery.

a. Find the optimal timing for crockery sale.

b. Check the Second order condition.

c. Rate of Growth of value function is equal to interest rate on cash sale receipts.

B. Find the monthly discrete compounding interest rate i that is equivalent to a continuous

compounding rate r is 50e0.3567t

C. Use the Nth derivative test to determine is the function is max, min or inflection point

F(x)=(x-2)6