Question
Your uncle is giving you $250 every year for the next ten years. There are two choices for using the money: you may either save
Your uncle is giving you $250 every year for the next ten years. There are two choices for using the money: you may either save the money with a bank which pays you an interest of 4% per year or invest the money with a bond paying you annul interest of 6%. a. what is the discount rate for you to find the present value? b. what is the value in present value if you are receiving the money at the end of each year? c. what is the value in present value if you are receiving the money at the beginning of each year? d. What is the difference between the answers in parts (b) and (c) and why will there be such a difference?
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