Question
Your grandfather has offered you a choice of one of the three following alternatives: $13,000 now; $6,500 a year for eight years; or $86,000 at
Your grandfather has offered you a choice of one of the three following alternatives: $13,000 now; $6,500 a year for eight years; or $86,000 at the end of eight 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? multiple choice 1 $86,000 received at end of eight years $6,500 received each year for eight years $13,000 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? multiple choice 2 $86,000 received at end of eight years $6,500 received each year for eight years $13,000 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