Question #2: (3+5=8 Marks)

1. Today, you have won a lottery that gives you two options to choose from: 

Option A: Receive $10,000 at the beginning of year 5. 

Option B: Receive $8,500 at the end of year 3. 

Which option will you choose if your opportunity cost is 12%? 

2. Mr. Aminur Rahman wants to buy a house but he does not like the idea of taking a loan. Rather than taking a loan now to buy the house, he has decided to buy the house after 10 years when he will accumulate enough money. The current price of the house he wants to buy is $200,000 and the price will grow at the rate of 8 percent per year according to the prediction of Mr. Aminur. How much should Mr. Aminur Rahman keep in the Bank account at the end of each year for the next 10 years in order to accumulate enough money to buy his desired house with cash at the end of the tenth year?

(Assume the bank will pay interest on the deposit at the rate of 12 percent)