Question
Your grandfather has offered you a choice of one of the three following alternatives: $9,500 now; $4,000 a year for seven years; or $51,000 at
Your grandfather has offered you a choice of one of the three following alternatives: $9,500 now; $4,000 a year for seven years; or $51,000 at the end of seven years. Use Appendix B and Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods.
a-1. Assuming you could earn 11 percent annually, compute the present value of each alternative: (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
a-2. Which alternative should you choose?
$51,000 received at end of seven years | |
$4,000 received each year for seven years | |
$9,500 received now |
b-1. If you could earn 12 percent annually, compute the present value of each alternative: (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
b-2. Which alternative should you choose?
$51,000 received at end of seven years | |
$4,000 received each year for seven years | |
$9,500 received now |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started