Time Value of Money

$5$ points

Using time value of money tables provided in chapter $13,$ calculate the values for each

of the items below.

Show the details of your calculations.

A$.$ Mike won the lottery and has the following options for his winnings:

He can invest his winnings at an annual rate of return of $4\%.$ Which option is

best? Show your calculations for each option. Hint $-$ use present value

techniques where applicable to make the options comparable.

A$1.$ $$100,000$ at the beginning of the year $($today$)$

A$1$ Answer

A$2.$ A lump sum payment of $$160,000$ at the end of the ninth year

A$2$ Answer

A$3.$ $$13,000$ at the end of each year for $8$ years

A$3$ Answer

Best choice is$?$

B$.$ Barb has been offered money from her parents. Her parents will give her

$$35,000$ at the end of the fifth year or either of the two other options.

Assuming she can invest at an interest rate of $5\%$ which of the three options

will give her the most money five years from now? Show calculations for the

value of each option. Hint $-$ Use future value techniques where applicable to