Question
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
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
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