Question
Gina Vitale has just contracted to sell a small parcel of land that she inherited a few years ago. The buyer is willing to pay
Gina Vitale has just contracted to sell a small parcel of land that she inherited a few years ago. The buyer is willing to pay $25,973 now, or the buyer will make a series of payments starting now and continuing at annual intervals shown in the following table, Because Gina doesn't really need the money today, she plans to let it accumulate in an account that earns 9% annual interest. Given her desire to buy a house five years after selling the lot, she decides to choose the payment alternativeeither the lump sum or the mixed streamthatprovides the higher future value at the end of 5 years. Which alternative will she choose?
The future value, FVn, of the lump sum deposit is $enter your response here. (Round to the nearest cent.)
The future value of the mixed stream of payments is $enter your response here. (Round to the nearest cent.)
Which alternative will Gina choose?(Select the best answer below.)
mixed stream
lump sum
Mixed Stream | |
Beginning of year | Cash Flow |
0 | $9,000 |
1 | $9,000 |
2 | $5,000 |
3 | $7,000 |
4 | $2,000 |
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