By the year 2016 you will have made your first million dollars.You invest it in a new company on January 1, 2017.The new company starts to earn a profit six months later.Thus, starting July 1, 2017, you receive income from the company in a continuous stream at a constant rate of 1/2 million dollars per year. Your bank offers interest at a nominal rate of 8% per year, compounded continuously.Consider the date when will you have received an income of $1 million from the company.(Do not take into account the bank's interest; this question is simply asking when the total income you have received will reach $1 million.)Which of the following is true?
A)Your investment paid off on that date.
B)Your investment paid off before that date
C)Your investment will not be paid off until after that date

Question

Quizplus · Accepted Answer

Since the company starts generating a continuous income of 1/2 million dollars per year starting from July 1, 2017, it will take 2 years to accumulate an additional $1 million in income. This means by July 1, 2019, you will have received $1 million from the company. However, this does not account for the initial investment of $1 million, so the investment itself is not paid off by this income alone.

By the Year 2016 You Will Have Made Your First