1. Suppose you want to invest $1,000 today in a project. You have the following investment options to pick from, Option 1: invest $1,000 for 7.5 years at 6.5% annually compounded rate in firm A and option 2: invest $1,000 for 8 years at 5% continuously compounded rate in firm B.
   1. How much will you make if you invested in firm A and firm B respectively?

[4 marks]

2. Given that investors prefer continuously compounded rates, based on your results in c(i) which of the two investment options would you pick and why?

[1 mark]