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Now it's time for you to practice what you've learned. Suppose that Ana just won the lottery and must choose between three award options: A
Now it's time for you to practice what you've learned.
Suppose that Ana just won the lottery and must choose between three award options:
A lump sum of $ received today
endofyear payments of $
endofyear payments of $
Assume the interest rate is entered as on your financial calculator.
Note: Take the absolute value of the present value when answering this question.
Using a financial calculator yields a present value for option of approximately
approximately
when the interest rate is Based on this, Ana should choose option
if she seeks to maximize
present value.
Now assume the interest rate is entered as on your financial calculator.
Note: Take the absolute value of the present value when answering this question.
Using the table you just filled out and a financial calculator, yields a present value for option of approximately
present value for option of approximately when the interest rate is Based on this, Ana should choose option
if she seeks to maximize present value.
Assume the interest rate is entered as on your financial calculator.
Note: Take the absolute value of the present value when answering this question.
Using the table you just filled out and a financial calculator, yields a present value for option of approximately
present value for option of approximately
when the interest rate is Based on this, Ana should choose option
if she seeks to maximize present value.
As the interest rate increases, options and become
attractive, relative to option
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