Your grandfather has offered you a choice of one of the three following alternatives: $8,000 now; $2,500 a year for ten years; or $42,000 at the end of ten years. (Use a Financial calculator to arrive at the answers. Round the final answers to the nearest whole dollar.)

a-1. Assuming you could earn 8 percent annually, compute the present value for the following amounts.

	Present value
$8,000 now		$
$2,500 a year for ten years		$
$42,000 at the end of ten years		$

a-2. Which alternative should you choose?

multiple choice 1

• $42,000 received at the end of ten years

• $2,500 received each year for ten years

• $8,000 received now

b-1. If you could earn 12 percent annually, compute the present value for the following amounts.

	Present value
$8,000 now		$
2,500 a year for ten years		$
$42,000 at the end of ten years		$

b-2. Which alternative should you choose?

multiple choice 2

• $2,500 received each year for ten years

• $42,000 received at the end of ten years

• $8,000 received now