Refer to Problem. Which investment is the better choice over the next 10 years?
Problem
An investor is presented with a choice of two investments: an established clothing store and a new computer store. Each choice requires the same initial investment and each produces a continuous income stream of 4%, compounded continuously.
The rate of flow of income from the clothing store is f(t) = 12,000 and the rate of flow of income from the computer store is expected to be g(t) = 10,000e0.05t.
Compare the future values of these investments to determine which is the better choice over the next 5 years.