Question
Your grandmother would like to share some of her fortune with you. She offers to give you money under one of the following scenarios (you
Your
grandmother
would like to share some of
her
fortune with you.
She
offers to give you money under one of the following scenarios (you get to choose):
| 1. | $7,550 a year at the end of each of the next seven years |
| 2. | $48,750 (lump sum) now |
| 3. | $99,350 (lump sum) seven 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
12%
interest rate?
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Practical financial management
Authors: William r. Lasher
5th Edition
0324422636, 978-0324422634
