An investment in a real estate venture will provide returns at the end of the next four years as follows: year 1, $5,500; year 2, $7,500; year 3, $9,500; and year 4, $12,500.
An investor wants to earn a 12 percent return compounded annually on her investment. How much should she pay for the investment?
Assuming that the investor wanted to earn an annual rate of 12 percent compounded monthly, how much would she pay for this investment? Why are these two amounts different?