Question
Your grandfather has offered you a choice of one of the three following alternatives: $10,500 now; $5,000 a year for nine years; or $61,000 at
Your grandfather has offered you a choice of one of the three following alternatives: $10,500 now; $5,000 a year for nine years; or $61,000 at the end of nine 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 7 percent annually, compute the present value of each alternative:
Note: Do not round intermediate calculations. Round your final answers to 2 decimal places.
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a-2. Which alternative should you choose?
multiple choice
$61,000 received at end of nine years
$5,000 received each year for nine years
$10,500 received now
b-1. If you could earn 8 percent annually, compute the present value of each alternative:
Note: Do not round intermediate calculations. Round your final answers to 2 decimal places.
|
b-2. Which alternative should you choose?
multiple choice
$5,000 received each year for nine years
$61,000 received at end of nine years
$10,500 received now
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