Question
Your father offers you a choice of $120,000 in 10 years or $45,000 today. Use Appendix B as an approximate answer, but calculate your final
Your father offers you a choice of $120,000 in 10 years or $45,000 today. Use Appendix B as an approximate answer, but calculate your final answer using the formula and financial calculator methods.
a-1. If money is discounted at 12 percent, what is the present value of the $120,000? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Present Value____
a-2. Which offer should you choose? $120,000 in 10 years $45,000 today
b-1. Now assume the offer is $120,000 in 7 years or $45,000 today. What is the present value of the $120,000 at 12 percent for 7 years? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Present Value___
b-2. Now, which offer should you choose? $120,000 in 7 years $45,000 today
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