If I have an investment that generates 1.5 MM during the next 20 years and We...

If I have an investment that generates 1.5 MM during the next 20 years and
We know that inflation for the expected period is 5.7% on average. To what amount
equivalent of constant annual payments equals those payments in a 12% annual plan
with continuous compounding?

Expert Solution

Year	Opening	Investment	Interest	closing
1	-	18,587.65	2,230.52	20,818.17
2	20,818.17	18,587.65	4,728.70	44,134.52
3	44,134.52	18,587.65	7,526.66	70,248.84
4	70,248.84	18,587.65	10,660.38	99,496.87
5	99,496.87	18,587.65	14,170.14	1,32,254.66
6	1,32,254.66	18,587.65	18,101.08	1,68,943.40
7	1,68,943.40	18,587.65	22,503.73	2,10,034.78
8	2,10,034.78	18,587.65	27,434.69	2,56,057.12
9	2,56,057.12	18,587.65	32,957.37	3,07,602.15
10	3,07,602.15	18,587.65	39,142.78	3,65,332.57
11	3,65,332.57	18,587.65	46,070.43	4,29,990.65
12	4,29,990.65	18,587.65	53,829.40	5,02,407.70
13	5,02,407.70	18,587.65	62,519.44	5,83,514.80
14	5,83,514.80	18,587.65	72,252.29	6,74,354.75
15	6,74,354.75	18,587.65	83,153.09	7,76,095.49
16	7,76,095.49	18,587.65	95,361.98	8,90,045.12
17	8,90,045.12	18,587.65	1,09,035.93	10,17,668.70
18	10,17,668.70	18,587.65	1,24,350.76	11,60,607.12
19	11,60,607.12	18,587.65	1,41,503.37	13,20,698.14
20	13,20,698.14	18,587.65	1,60,714.30	15,00,000.09

Investment of $18,587.65 for 20 years with interest at 12% shall equal 1.5 milion at 20 year end.

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