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Question 1: As a winner of a racing competition, you can choose one of the following prizes. Option A: $300000 now (1 mark) Option B:
Question 1: As a winner of a racing competition, you can choose one of the following prizes. Option A: $300000 now (1 mark) Option B: $280000 at the end of 5 years (3 marks) Option C: $25000 per year forever (3 marks) Option D: $30000 per year over the next 10 years(4 marks) Option E: $ 7500 next year and increasing thereafter by 5.5% per year forever (4 marks) If interest rate is 12%, EXPLAIN which one you will choose. (Hint: calculate the PV for each option)
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