1. LOL Inc. expects to earn 627,000 this year and projects a growth rate in earnings of 4.5%/year thereafter (k=3.5%)/ What is the PV of the earnings if it expewcts to grow for another 8 years and to have then level earnings forever?
A) 24359974.94
B) 24360079.94
C) 24360174.94
D) 24360274.94
E) None of the above
2. You have the choice between two accounts: account A pays 8% compounded continuously and account B pays 8.16% compounded semiannually. Rounded up to two decimals places, which account offers a better deal? (You must round the apporoximation after all the computations are done not at an intermediate stage)
A) A
B) B
C) Both are the same
D) Cannot be answered because the ammount of deposit is not given.
E) Cannot be answered because neither amount of deposit nor the life of the account is given.