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N Need proper formulas before inserting values. Let now be t = 0. And let t count the number of years. For each of the
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Need proper formulas before inserting values.
Let now be t = 0. And let t count the number of years. For each of the options listed in each part below, indicate the ranking of their present values (i.e., "greater than, " "less than, " or "equal to") given the effective annual interest rate given in each part. Show any supporting work. a. The effective annual rate is 5%. Option 1: $100 every year forever with the first Option 2: $105 every year forever with the first PV of Option 1 is greater than b. The effective annual rate is 8%. Option 3: $100 every year forever with the first Option 4: $110 every year forever with the first payment in 2 years (at t = 2). PV of Option 3 is greater than c. The effective annual rate is 5%. Option 5: $100 every two years forever with the first payment in 2 years (at t = 2). Option 6: $102.50 every two years for every with the first payment in 2.5 years (at t = 2.5). PV of Option 5 is greater than less than equal to PV of Option 6 d. The effective annual rate be 5%. Option 7: $100 every two years forever with the first payment in 1.5 years (at t = 1.5) and $50 every year forever with the first payment at t = 3. Option 8: $50 every two years forever with the first payment in 1.5 years (at t = 1.5) and $100 every 3 years forever with the first payment at t = 3Step by Step Solution
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