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26 May, 14:46

Environmental recovery company RexChem Partners plans to finance a site reclamation project that will require a 4-year cleanup period. If the company borrows $4.1 million now, how much will the company have to get at the end of each quarter in order to earn 15% per year, compounded weekly on its investment?

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  1. 26 May, 14:50
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    728,839.57883 per quarter.

    Explanation:

    1. Effective Annual Rate = 10%

    Effective rate continuously compounded = eln (1+r) - 1

    ln (1.1) = 0.09531018

    Montly rate = 0.09531018/12 = 0.07942515

    e0.07942515 - 1 = 0.00797414

    Hence, monthly continuous rate =

    0.797414%

    2. Effective Quarterly rate

    = (1 + (Rate per year/52)) Number of weeks

    = (1+Rate per quarter) 4,

    (1 + (0.15/52)) 208 = (1+r) 4,

    r = 16.1583394% per quarter

    Now, using the PMT function in excel,

    =PMT (16.1583394%,16,-4100000)

    728,839.57883

    per quarter

    Therefore In order to earn 15% per year compounded weekly on its investment at the end of each quarter, the company will have to get $728,839.57883
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