FBS 210 revision

A financial planner has offered you three possible options for receiving cash flows. You must choose the option that has the highest present value. (1) R1 200 today and another R1 200 at the beginning of each of the next 11 months. These funds are to be deposited in an account paying a 12 percent nominal annual interest rate, compounded monthly. (2) R14 000 at the end of the year (assume a 12 percent nominal interest rate with semi-annual compounding). (3) A payment scheme of 4 quarterly payments made over the next year. The first payment of R2 300 is to be made in exactly three months' time. Payments will increase by 20 percent each quarter. The money is to be deposited in an account paying a 12 percent nominal annual interest rate, compounded quaney. (4) Which option would you choose