B 17 You are presented with 5 investment options: 18 Option 1: A contract that will pay you $1,000 at the end of year 1 and year 2, $500 at the end of year 19 3 and 4, nothing at the end of year 5, and $1,000 at the end of year 6 and year 7. 20 Option 2: A $20,000 face value bond that will pay you an annual coupon of $360 over the next 10 21 years. Option 3: A $30,000 face value bond that has a 1% annual coupon rate, paid semi-annually over the next 10 years. Option 4: A stock portfolio that pays a constant total dividend of $320 annually for a very long, undetermined period of time. 22 Option 5: A cash prize that pays you an annuity due of $2550 for 7 years. (15 points) 231 What is the present value of Option 1? 24 25 26 27 28 29 30 31 32 33 2 What is the present value of Option 2? (10 points) 34 35 36 B 17 You are presented with 5 investment options: 18 Option 1: A contract that will pay you $1,000 at the end of year 1 and year 2, $500 at the end of year 19 3 and 4, nothing at the end of year 5, and $1,000 at the end of year 6 and year 7. 20 Option 2: A $20,000 face value bond that will pay you an annual coupon of $360 over the next 10 21 years. Option 3: A $30,000 face value bond that has a 1% annual coupon rate, paid semi-annually over the next 10 years. Option 4: A stock portfolio that pays a constant total dividend of $320 annually for a very long, undetermined period of time. 22 Option 5: A cash prize that pays you an annuity due of $2550 for 7 years. (15 points) 231 What is the present value of Option 1? 24 25 26 27 28 29 30 31 32 33 2 What is the present value of Option 2? (10 points) 34 35 36