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Answer each of the following independent questions. Alex Meir recently won a lottery and has the option of receiving one of the following three prizes:
Answer each of the following independent questions. |
Alex Meir recently won a lottery and has the option of receiving one of the following three prizes: (1) $88,000 cash immediately, (2) $34,000 cash immediately and a six-period annuity of $9,300 beginning one year from today, or (3) a six-period annuity of $18,400 beginning one year from today. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) |
1-a. | Assuming an interest rate of 7%, determine the PV value for the above options. |
X Answer is complete but not entirely correct. PV Option + A Option 1 Option 2 Option 3 Annuity Payment $ 0 $ 9,300 $ 18,400 PV Annuity $ 0 $ 78,324 X $ 87,694 Immediate Cash $ 88,000 $ 34,000 $ = 88,000 112,324 87,694 + + A + A
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