4. Your grandmother would like to share some of her fortune with you. She offers to give you money under one of the following scenarios (you get to choose): 1. $7,250 a year at the end of each of the next seven years 2. $49,650 (lump sum) now 3. $98,150 (lump sum) seven years from now Calculate the present value of each scenario using a 6% interest rate. Which scenario yields the highest present value? Would your preference change if you used a 12% interest rate? (Click the icon to view the present value annuity factor table.) 2(Click the icon to view the present value factor table.) 3(Click the icon to view the future value annuity factor table.) 4(Click the icon to view the future value factor table.) Using a 6% interest rate, calculate the present values for each scenario. (Round the amounts to the nearest dollar.) Scenario 1 Scenario 2 Present value = $ 40,470 = Scenario 3 = Which scenario yields the highest present value? (1) - appears to be the best option. Based on a 6% interest rate, its present value is the (2) Using a 12% interest rate, calculate the present values for each scenario. (Round the amounts to the nearest dollar.) Present value = Scenario 1 Scenario 2 Scenario 3 (3) - - appears to be the best option. Based on a 12% interest rate, its present value is the (4) 1: Present Value of Annuity of $1 Present Value of Annuity of $1 Periods 1% 2% 3% 4% 5% 6% 8% 10% 12% 14% 16% 18% 20% 0.990 0.980 0.971 0.962 0.952 0.943 0.926 0.909 0.893 0.877 0.862 0.847 0.833 1.970 1.942 1.913 1.886 1.859 1.833 1.783 1.736 1.690 1.647 1.605 1.566 1.528 2.941 2.884 2.829 2.775 2.723 2.673 2.577 2.487 2.402 2.322 2.246 2.174 2.108 3.902 3.808 3.717 3.630 3.546 3.465 3.312 3.170 3.037 2.914 2.798 2.690 2.589 4.853 4.713 4.580 4.452 4.329 4.212 3.993 3.791 3.605 3.433 3.274 3.127 2.991 5.795 5.601 5.417 5.242 5.076 4.917 4.623 4.355 4.111 3.889 3.685 3.498 3.326 7 6.728 6.472 6.230 6.002 5.786 5.582 5.206 4.868 4.564 4.288 4.039 3.812 3.605 7.652 7.325 7.020 6.733 6.463 6.210 5.747 5.335 4.968 4.639 4.344 4.078 3.837 8.566 8.162 7.786 | 7.435 7.108 6.8026.247 5.759 5.328 4.9464.607 4.303 | 4.031 9.471 8.983 8.530 8.111 7.722 7.360 6.710 6.145 5.650 5.216 4.833 4.494 4.192 10.368 9.787 9.253 8.760 8.306 7.887 7.139 6.495 5.938 5.453 5.029 4.656 4.327 12 11.255 10.575 9.954 9.385 8.863 8.384 7.536 6.814 6.194 5.660 5.197 4.793 4.439 12.134 11.348 10.635 9.986 9.394 8.853 7.904 7.103 6.424 5.842 5.342 4.910 4.533 13.004 12.106 11.296 10.563 9.899 9.295 8.244 7.3676.628 6.002 5.468 5.008 4.611 15 13.865 12.849 11.93811.118 10.380 9.712 8.559 7.606 6.811 6.142 5.575 5.092 4.675 2018.046 16.351 14.877 13,590 12.462 11.470 9.818 8.5147.469 6.623 5.929 5.353 4.870 25 22.023 19.523 17.413 15.622 14.094 12.783 10.675 9.077 7.843 6.8736.097 5.467 4.948 25.808 22.396 19.600 17.292 15.372 13.765 11.258 9.427 8.055 7.003 6.177 5.517 4.979 40 32.835 27.355 23.11519.793 17.159 15.046 11.925 9.779 8.244 7.105 6.233 5.548 4.997 30 2: Present Value of $1 Present Value of $1 Periods 1% 2% 3% 4% 5% 6% 8% 10% 12% 14% 16% 18% 20% 0.990 0.980 0.971 0.962 0.952 0.943 0.926 0.909 0.893 0.877 0.862 0.847 0.833 0.980 0.961 0.943 0.925 0.907 0.890 0.857 0.826 0.797 0.769 0.743 0.718 0.694 0.971 0.942 0.915 0.889 0.864 0.840 0.794 0.751 0.712 0.675 0.641 0.609 0.579 0.961 0.924 0.888 0.855 0.823 0.792 0.735 0.683 0.636 0.592 0.552 0.516 0.482 0.951 0.906 0.863 0.822 0.784 0.747 0.681 0.621 0.567 0.519 0.476 0.437 0.402 0.942 0.888 0.837 0.790 0.746 0.705 0.630 0.564 0.507 0.456 0.410 0.370 0.335 0.933 0.871 0.813 0.760 0.711 0.665 0.583 0.513 0.452 0.400 0.354 0.314 0.279 0.923 0.853 0.789 0.731 0.677 0.627 0.540 0.467 0.404 0.351 0.305 0.266 0.233 0.914 0.837 0.766 0.703 0.645 0.592 0.500 0.424 0.361 0.308 0.263 0.225 0.194 10 0.905 0.820 0.744 0.676 0.614 0.558 0.463 0.386 0.322 0.270 0.227 0.191 0.162 0.896 0.804 0.722 0.650 0.585 0.527 0.429 0.350 0.287 0.237 0.195 0.162 0.135 0.887 0.788 0.701 0.625 0.557 0.497 0.397 0.319 0.257 0.208 0.168 0.137 0.112 0.879 0.773 0.681 0.601 0.530 0.469 0.368 0.290 0.229 0.182 0.145 0.116 0.093 0.870 0.758 0.661 0.577 0.505 0.442 0.340 0.263 0.205 0.160 0.125 0.099 0.078 15 0.861 0.743 0.642 0.555 0.481 0.417 0.315 0.239 0.183 0.140 0.108 0.084 0.065 20 0.820 0.673 0.554 0.456 0.377 0.312 0.215 0.149 0.104 0.073 0.051 0.037 0.026 0.780 0.610 0.478 0.375 0.295 0.233 0.146 0.092 0.059 0.038 0.024 0.016 0.010 30 0.742 0.552 0.412 0.308 0.231 0.174 0.099 0.057 0.033 0.020 0.012 0.007 0.004 40 0.672 0.453 0.307 0.208 0.142 0.097 0.046 0.022 0.0110.005 0.003 0.001 0.001 25 3: Future Value of Annuity of $1 1% 1.000 2.010 3.030 4.060 5.101 6.152 7.214 8.286 9.369 10.462 2% 3% 4% 1.000 1.000 1.000 2.020 2.030 2.040 3.060 3.091 3.122 4.122 4.184 4.246 5.204 5.309 5.416 6.308 6.468 6.633 7.434 7.662 7.898 8.583 8.892 9.214 9.755 10.159 10.583 10.950 11.464 12.006 12.169 12.808 13.486 14.192 15.026 14.680 15.61816.627 15.974 17.086 18.292 17.293 18.599 20.024 24.297 26.870 29.778 32.03036.459 41.646 40.568 47.575 56.085 60.402 75.401 95.026 Future Value of Annuity of $1 5% 6% 8% 10% 12% 14% 16% 18% 20% 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 L 1.000 2.050 2.060 2.080 2.100 2.120 2.140 2.160 2.180 2.200 3.153 3.184 3.246 3.310 3.374 3.440 3.506 3.572 3.640 4.310 4.375 4.506 4.641 4.779 4.921 5.066 5.215 5.368 5.526 5.637 5.867 6.105 6.353 6.610 6.877 7.154 7.442 6.802 6.975 7.336 7.716 8.115 8.536 8.977 9.442 9.930 8.142 8.394 8.923 9.487 10.089 10.730 11.414 12.142 12.916 9.549 9.897 10.637 11.436 12.300 13.233 14.240 15.327 16.499 11.027 11.491 12.488 13.579 14.776 16.085 17.519 19.086 20.799 12.578 13.181 14.487 15.937 17.549 19.337 21.321 23.521 25.959 14.207 14.972 16.645 18.531 20.655 23.045 25.733 28.755 32.150 15.917 16.870 18.977 21.384 24.133 27.271 30.850 34.931 39.581 17.713 18.882 21.495 24.523 28.029 32.089 36.788 42.219 48.497 19.599 21.015 24.215 27.975 32.393 37.581 43.672 50.818 59.196 21.579 23.276 27.152 31.772 37.280 43.842 51.660 60.965 72.035 33.066 36.786 45.762 57.275 72.052 91.025 115.380 146.628 186.688 47.727 54.865 73.106 98.347 133.334 181.871 249.214 342.603 471.981 66.439 79.058 113.283 164.494 241.333 356.787 530.312 790.948 |1,181.882 120.800 154.762 259.057 442.593 767.091 1,342.0252,360.757 4,163.2137.343.858 11.567 12.683 13412 13.809 14.947 16.097 22.019 28.243 34.785 48.886 40 4: Future Value of $1 Periods | 1% 1.010 1.020 1.030 1.041 1.051 1.062 1.072 1.083 1.094 1.105 1.166 2% 1.020 1.040 1.061 1.082 1.104 1.126 1.149 1.172 1.195 1.219 3% 1.030 1.061 1.093 1.126 1.159 1.194 1.230 4% 1.040 1.082 1.125 1.170 1.217 1.265 1.316 1.369 1.423 1.480 Future Value of $1 6% 8% 1.060 1.080 1.124 1.191 1.260 1.262 1.360 1.338 1.469 5% 1.050 1.103 1.158 1.216 1.276 10% 1.100 1.210 1.331 1.464 1.611 1.267 1.340 1.407 1.477 1.551 1.629 1.419 1.504 1.594 1.689 1.791 1.587 1.714 1.851 1.999 2.159 4.300 1.305 1.344 12% 14% 16% 18% 20% 1.120 1.140 1.160 1.180 1.200 1.254 1.300 1.346 1.392 1.440 1.405 1.482 1.561 1.643 1.728 1.574 1.689 1.811 1.939 2.074 1.762 1.925 2.100 2.288 2.488 1.974 2.195 2.436 2.700 2.986 2.211 2.502 2.826 3.185 3.583 2.476 2.853 3.278 3.759 2.773 3.252 3.803 4.435 5.160 3.106 3.707 4.411 5.234 6.192 3.479 4.226 5.117 6.176 7.430 3.896 4.818 5.936 7.288 8.916 4.363 5.492 6.886 8.599 10.699 4.887 6.261 7.988 10.147 12.839 5.474 7.138 9.266 11.974 15.407 9.646 13.743 19.461 27.393 38.338 17.000 26.462 40.874 62.669 95.396 29.960 50.950 85.850 143.371 237.376 93.051 188.884 378.721 750.378 1,469.772 1.116 1.127 1.138 1.149 1.161 1.220 1.282 1.348 1.489 1.243 1.268 1.294 1.319 1.346 1.486 1.641 1.811 2.208 1.384 1.426 1.469 1.513 1.558 1.806 2.094 2.427 3.262 1.539 1.601 1.665 1.732 1.801 2.191 2.666 3.243 4.801 1.710 1.796 1.886 1.980 2.079 1.898 2.012 2.133 2.261 2.397 3.207 4.292 5.743 10.286 1.772 1.949 2.144 2.358 2.594 2.853 3.138 3.452 3.797 4.177 6.727 10.835 17.449 45.259 2.332 2.518 2.720 2.937 3.172 4.661 6.848 10.063 21.725 2.653 3.386 4.322 7.040