Your grandfather has offered you a choice of one of the three following alternatives: $7,500 now; $2,200
a year for nine years; or $31,000 at the end of nine years. Assuming you could earn 10 percent annually,
which alternative should you choose? If you could earn 11 percent annually, would you still choose the same alternative?
Assumptions
Amount now	$7,500
Annuity (9 years)	$2,200
Amount in 9 years	$12,000
Present values		10%	11%
1. Annuity (9 years)		FORMULA ?	FORMULA ?
2. Amount received in 9 years	FORMULA ?	FORMULA ?
3. Assuming you could earn 10 percent annually, which alternative should you choose?
4. If you could earn 11 percent annually, would you still choose the same alternative?