You are given the following options of receiving money on every Jan 23rd, starting in year 2017 Option A: $1,000,000 each time for the rest of your life option B $1 first time, with each subsequent payment is double that of the last Assume that you will live long enough for a total of 25 payments. Set up and specify the present values of the 2 options Which option will you choose if the risk-free rate is 0%? Which option will you choose if the risk-free rate is 6%? At what risk-free interest rate range should you choose each of the options? On interest rate compounding: True or False: If your bank compounds daily instead of annually, then your interest earned will be twice as much! You may assume the bank currently compounds your interest annually at 30%. At what interest rate will that statement be completely precise Le., at what interest rate will the daily compounding be exactly twice that of the annual compounding at the end of 1 year? You bought $5, 500 worth of stocks in a certain company. Rank the following scenarios in the order of your preference The stock grows at 30% a year for the first 5 years, follow by 10% a year for the next 5 years. The stock grows at 10% a year for the first 5 years, follow by 30% a year for the next 5 years. The stock grows at 20% a year for 10 years You are about to buy a new car for $20,000 and the salesperson tells you of a promotion for Tech students: A $2,000 discount up front or a 0% financing for 72 months. Which one should you choose assuming that you will need a loan, at 5.9% APR, if you decide to take the discount up front? You can assume the first payment to start today