This question relates to issues related to interest rates and rates of return.

CHAPTER $1$

SLIDES $15,16,$&$17$

CONTINUOUS VS DISCRETE COMPOUNDING$/$DISCOUNTING

a$.$ Compute the Present Value of the following cash flows using a continuously compounded annual interest rate of $3\mathrm{.}5\%.$

$\backslash$table$[[$Year$,$Cash Flows$],[0\mathrm{.}55,700],[1\mathrm{.}80,875],[2\mathrm{.}25,795],[3\mathrm{.}85,940],[4\mathrm{.}70,715],[6\mathrm{.}50,300],[7\mathrm{.}15,600],[8\mathrm{.}60,350],[9\mathrm{.}35,850]]$

b$.$ Suppose at time $0$ you had $$800$ in the bank and $14$ years later you had $$7600.$ Calculate the effective annual rate of return if the bank pays interest continuously.

c$.$ Suppose at time $0$ you had $$900$ in the bank and $21$ years later you had $$9000.$ Calculate the effective annual rate of return if the bank pays compound interest weekly.