Your grandfather would like to share some of his fortune with you. He offers to give you money under one of the following scenarios (you get to choose): 1. $8,000 a year at the end of each of the next eight years 2. $49,650 (lump sum) now 3. $100,250 (lump sum) eight years from now Calculate the present value of each scenario using a 6% interest rate. Which scenario yields the highest present value? Would your preference change if you used a 10 % interest rate? (Click the icon to view the present value annuity factor table.) F(Click the icon to view the present value factor table.) (Click the icon to view the future value annuity factor table.) (Click the icon to view the future value factor table.) Using a 6% interest rate, calculate the present values for each scenario. (Round the amounts the nearest dollar.) Present value Scenario 1 Present Value of Annuity of $1 Periods 1% 2% 3% 4% 5% 6% 8% 10% 12% 14% 16% 18% 20% 1 0.990 0.980 0.971 0.962 0.952 0.943 0.926 0.909 0.893 0.877 0.862 0.847 0.833 2 1.970 1.942 1.913 1.886 1.859 1.833 1.783 1.736 1,690 1.647 1.605 1.566 1.528 3 2.941 2.884 2.829 2.775 2.723 2.673 2.577 2,487 2.402 2.322 2.246 2.174 2.106 3.902 3.808 3.717 3.630 3.546 3.465 3.312 3.170 3.037 2.914 2.798 2.690 2.589 5 4,853 4.713 4.580 4.452 4,329 4.212 3.993 3.791 3,605 3.433 3.274 3.127 2.991 5.795 5.601 5.417 5.242 5.076 4,917 4.623 4.355 4.111 3.889 3.685 3.498 3.326 7 6.728 6.472 6.230 6.002 5.786 5.582 5.206 4.868 4.564 4.288 4.039 3.812 3.605 7.652 7,325 7.020 6.733 6.463 6.210 5.747 5.335 4.968 4.639 4.344 4.078 3.837 8.566 8.162 7,786 7,435 7.108 6.802 6.247 5.759 5.328 4,946 4.607 4.303 4.031 10 9.471 8,983 8,530 8.111 7.722 7,360 6.710 6,145 5.650 5.216 4,833 4.494 4.192 10.368 9.787 9.253 8.760 8.306 7,887 7.139 6.495 5.938 5.453 5.029 4.656 4.327 11 12 11.255 10.575 9.954 9.385 8.863 8.384 7.536 6.814 6.194 5.660 5.197 4,793 4.439 13 12.134 11.348 10.635 9.986 9.394 8.853 7.904 7.103 6.424 5.842 5.342 4,910 4.533 13.004 10.563 14 12.106 11.296 9.899 9.295 8.244 7,367 6.628 6.002 5.468 5.008 4.611 13.865 12.849 15 11.938 11.118 10.380 9,712 8.559 7.606 6.811 6,142 5,575 5,092 4.675 12.462 11.470 20 18.046 22.023 25.808 32,835 27.355 16.351 14.877 13.590 17.413 15.622 9.818 12.783 10.675 15.372 13.765 11.258 17.159 15.046 11.925 8.514 7,469 6.623 5.929 5.353 4,870 25 19.523 14.094 9.077 7.843 6.873 6.097 5.467 4.948 30 22.396 19.600 17.292 9.427 8.055 7,003 6.177 4.979 5.517 19.793 40 23.115 9.779 8.244 7.105 6.233 5,548 4,997 Future Value of Annuity of $1 2% 3% 4% 6% 8% 10% 12 % Periods 1% 5% 14% 16% 18% 20% 1 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1,000 2.030 3.091 2.050 3.153 2 2.010 2.020 2.040 2.060 2.080 2,100 2.120 2.140 2.160 2.180 2.200 3 3.030 3.060 3.122 3.184 3.246 3.310 3,374 3.440 3,506 3,572 3.640 4.246 5.215 4 4.060 4.122 4.184 4.310 4.375 4.506 4,641 4.779 4.921 5,066 5.368 5 5.101 5.204 5.309 5416 5.526 5.637 5.867 6.105 6.353 6.610 6.877 7.154 7.442 6 6.152 6.308 6.468 6.633 6.802 6.975 7,336 7,716 8.115 8,536 8,977 9.442 9,930 7 7,214 7,434 7,662 7,898 8.142 8.394 8.923 9.487 10.089 10.730 11.414 12.142 12.916 8 8.286 8.583 8.892 9.214 9,549 9.897 10.637 11.436 12.300 13.233 14.240 15.327 16.499 9 9.369 9.755 10.159 10.583 11.027 11.491 12,488 13.579 14.776 16,085 17.519 19.086 20.799 10 10.462 10.950 11.464 12,006 12,578 13.181 14.487 15.937 17.549 19.337 21.321 23.521 25.959 13.486 14.972 11 11.567 12.169 12.808 14.207 16.645 18.531 20.655 23.045 25.733 28.755 32,150 34.931 42.219 12 12.683 13.412 14.192 15.026 15.917 16.870 18.977 21.384 24.133 27.271 30.850 39.581 13 13.809 14.680 15.618 16.627 17.713 18.882 21.495 24,523 28.029 32.089 36.786 48,497 17.086 32.393 43.672 14 14.947 15.974 18.292 19.599 21.015 24.215 27,975 37.581 50.818 59.196 37.280 15 16.097 17.293 18.599 20.024 21.579 23.276 27.152 31.772 43.842 51.660 60.965 72.035 29.778 20 22.019 24.297 26.870 33.066 36.786 45.762 57.275 72.052 91,025 115.380 146.628 186.688 25 28.243 32.030 36,459 41.646 47.727 54.865 73.106 98.347 133.334 181.871 249.214 342,603 471.981 30 34.785 40.568 47,575 56.085 66.439 79.058 113.283 164.494 241.333 356,787 530.312 790.948 1,181.882 1,342.025 2,360.757 4,163.213 7,343.858 48.886 40 60.402 75.401 95.026 120.800 154.762 259.057 442,593 767,091 coNco o Present Value of $1 Periods 1% 2% 3% 4% 5% 6% 8% 10% 12% 14% 16% 18% 20% 1 0.990 0.980 0.971 0.962 0.952 0.943 0.926 0.909 0.893 0.877 0.862 0.847 0.833 2 0.980 0.961 0.943 0.925 0.907 0.890 0.857 0.826 0.797 0.769 0.743 0.718 0.694 3 0.971 0.942 0.915 0.889 0.864 0.840 0.794 0.751 0.712 0.675 0.641 0.609 0.579 4 0.961 0.924 0.888 0.855 0.823 0.792 0.735 0.683 0.636 0.592 0.552 0.516 0.482 5 0.951 0.906 0.863 0.822 0.784 0.747 0.681 0.621 0,567 0.519 0.476 0.437 0.402 0.942 0,888 0.837 0.790 0.746 0.705 0.630 0.564 0.507 0.456 0.410 0.370 0.335 7 0.933 0.871 0.813 0.760 0.711 0.665 0.583 0.513 0.452 0.400 0.354 0.314 0.279 0.923 0.853 0.789 0.731 0.677 0.627 0.540 0.467 0.404 0.351 0.305 0.266 0.233 0.914 0.837 0.766 0.703 0.645 0.592 0.500 0.424 0.361 0.308 0.263 0.225 0.194 10 0.905 0.820 0.744 0.676 0.614 0.558 0.463 0.386 0.322 0.270 0.227 0.191 0.162 11 0.896 0.804 0.722 0.650 0.585 0.527 0.429 0.350 0.287 0.237 0.195 0.162 0.135 12 0.887 0.788 0.701 0.625 0.557 0.497 0.397 0.319 0.257 0.208 0.168 0.137 0.112 13 0.879 0.773 0.681 0.601 0.530 0.469 0.368 0.290 0.229 0.182 0.145 0.116 0.093 14 0.870 0.758 0.661 0.577 0.505 0.442 0.340 0.263 0.205 0.160 0.125 0.099 0.078 15 0.861 0.743 0.642 0.555 0.481 0.417 0.315 0.239 0.183 0.140 0.108 0.084 0.065 20 0.820 0.673 0.554 0.456 0.377 0.312 0.215 0.149 0.104 0.073 0.051 0.037 0,026 25 0.780 0.610 0.478 0.375 0.295 0.233 0.146 0.092 0.059 0.038 0,024 0.016 0.010 30 0.742 0.552 0.412 0.308 0.231 0.174 0.099 0.057 0.033 0.020 0.012 0.007 0.004 40 0.672 0.453 0.307 0.208 0.142 0.097 0.046 0.022 0.011 0.005 0.003 0.001 0.001 Future Value of $1 Periods 1% 2% 3% 4% 5% 6% 8% 10% 12% 14% 16% 18% 20% 1 1.010 1.020 1.030 1.040 1,050 1.060 1.080 1.100 1.120 1.140 1.160 1.180 1200 2 1.020 1.040 1.061 1.082 1.103 1.124 1.166 1210 1.254 1.300 1.346 1.392 1440 3 1.030 1.061 1.093 1.125 1.158 1.191 1260 1.331 1.405 1.482 1.561 1.643 1.728 4 1.041 1.082 1.126 1.170 1216 1.262 1.360 1464 1.574 1.689 1.811 1.939 2.074 5 1.051 1.104 1.159 1.217 1.276 1.338 1469 1.611 1.762 1.925 2.100 2.288 2.488 6 1.062 1.126 1.194 1.265 1.340 1.419 1.587 1.772 1.974 2.195 2.436 2.700 2.986 7 1.072 1.149 1.230 1.316 1.407 1.504 1.714 1.949 2.211 2.502 2.826 3.185 3.583 8 1.083 1.172 1.267 1.369 1.477 1.594 1.851 2.144 2.476 2.853 3.278 3,759 4.300 9 1.094 1.195 1.305 1.423 1.551 1.689 1.999 2.358 2.773 3.252 3.803 4.435 5.160 10 1.105 1.219 1.344 1.480 1.629 1.791 2.159 2.594 3.106 3.707 4.411 5.234 6.192 11 1.116 1.243 1.384 1.539 1.710 1.898 2.332 2.853 3.479 4.226 5.117 6.176 7.430 12 1.127 1.268 1.426 1.601 1.796 2.012 2.518 3.138 3.896 4.818 5.936 7.288 8.916 13 1.138 1294 1.469 1.665 1.886 2.133 2.720 3.452 4.363 5.492 6.886 8.599 10.699 14 1.149 1.319 1.513 1.732 1.980 2.261 2.937 3.797 4.887 6.261 7.988 10.147 12.839 15 1.161 1.346 1.558 1.801 2.079 2.397 3.172 4.177 5.474 7.138 9.266 11.974 15.407 20 1.220 1.486 1.806 2.191 2.653 3.207 4.661 6.727 9.646 13.743 19.461 27.393 38.338 25 1.282 1.641 2.094 2.666 3.386 4.292 6.848 10.835 17.000 26.462 40.874 62.669 95.396 50.950 30 1.348 1.811 2,427 3.243 4.322 5.743 10.063 17,449 29.960 85.850 143.371 237.376 40 1.489 2.208 3.262 4.801 7,040 10.286 21,725 45,259 93,051 188.884 378.721 750.378 1,469.772 st LO