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A financial planner has offered you three possible options for receiving cash flows. You must choose the option that has the highest present value. (i)
A financial planner has offered you three possible options for receiving cash flows. You must choose the option that has the highest present value. (i) $1,000 now and another $1,000 at the beginning of each of the 11 subsequent months during the remainder of the year, to be deposited in an account paying a 12 percent nominal annual rate but compounded monthly (to be left on deposit for the year). (ii) $12,750 at the end of the year (assume a 12 percent nominal interest rate with quarterly compounding). (iii) A payment scheme of 4 semi-annual payments made over the next two years. The first payment of $3000 is to be made at the end of the six months. Payments will increase by 20 percent semi-annually. The money is to be deposited in an account paying a 12 percent nominal annual rate, but compounded semi-annually (to be left on deposit for the entire 2-year period)
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