Question
As winner of a racing competition, you can choose one of the following prizes: Option A: $30,000 to be received at the end of each
As winner of a racing competition, you can choose one of the following prizes:
Option A: $30,000 to be received at the end of each year for 10 years, the first payment occurring 3 years from now.
Option B: $250,000 at the end of five years.
Option C: $16,000 per year forever, the first payment starting one year from now.
Option D: $10,000 in year 1 and increasing thereafter by 5.5% per year forever.
Option E: $45,000 per year every year for 4 years with the first payment now.
If the interest rate is 12% per annum compounded annually, calculate the present value (PV) for each of the options above. Show workings.
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