Your brother has offered to give you either $5,000 today or $10,000 in 10 years. If...

Question

Question

Your brother has offered to give you either $5,000 today or $10,000 in 10 years. If the interest rate is 7% per year, which option is preferable?

Answer 1

Answer #1

The two options available are

$5000 today or $10000 in ten years

The interest rate is 7%

Present value formula=received funds/(rate^year)

Present value of $10,000= Amount*PVF@7% for ten years

PV =(10000)/(1.07^10)

=5083.49

The present value of $10000 is $83.49 higher than the $5,000 today option

Answer 2

Similar Homework Help Questions

Your brother has offered to give you either $5,000 today or $10,000 in ten years. If...

Your brother has offered to give you either $5,000 today or $10,000 in ten years. If the interest rate is 7% per year, which option is preferable?
Your brother has offered to give you either $45,000 today or $90,000 in 12 years. If the...

Your brother has offered to give you either $45,000 today or $90,000 in 12 years. If the interest rate is 7% per year, which option is preferable?
P 3-24 (similar to) Your brother has offered to give you either $20,000 today or $40,000...

P 3-24 (similar to) Your brother has offered to give you either $20,000 today or $40,000 in 10 years. If the interest rate is 7% per year, which option is preferable? The present value of the future amount (amount received n 10 years) is $1 (Round to the nearest dollar.) Your bank pays 2.5% interest per year. You put $1,300 in the bank today and $700 more in the bank in one year. How much will you have in the...

2) a) b) Jay's brother has offered to give him either $5,000 today or $7,000...

2) a) b) Jay's brother has offered to give him either $5,000 today or $7,000 in 4 years. If the opportunity cost of both options is 7% per year, which option should Jay choose? At what opportunity cost will Jay be indifferent between the two options? This homework includes problems from Time Value of Money. Please draw a timeline for each problem, clearly mark all the inputs, and indicate the unknown component on the timeline
Your brother has offered to give you $ 140, starting next year, and after that growing...

Your brother has offered to give you $ 140, starting next year, and after that growing at 2.5 % per year for the next 20 years. You would like to calculate the value of this offer by calculating how much money you would need to deposit in a local bank so that the amount will generate the same cash flows as he is offering you. Your local bank will guarantee a 6.1 % annual interest rate so long as you...
Your parents have offered to give you $10,000 for each of the next 5 years. You...

Your parents have offered to give you $10,000 for each of the next 5 years. You feel like you could use that money now, so you wan to figure out how much it is worth today. If you think that the relevant interest rate is 5%, what is the present value of the 5 payments?

a friend who owes you money has offered to pay you back by making either one...

a friend who owes you money has offered to pay you back by making either one lump sum payment today or payments of 5000 in one year, 7500 in two years, and 10000 in three years. assume the discount rate is 5%. A friend who owes you money has offered to pay you back by making either one lump sum payment today or payments of $5,000 in one year, $7,500 in two years, and $10,000 in three years. Assume the...
Question 18 1 pts Your brother has offered to loan you $500 for two years. At...

Question 18 1 pts Your brother has offered to loan you $500 for two years. At the end of the year you must repay him $1,300. What is the effective interest rate on this loan if interest is compounded daily? 61.25% 53.66% 80.00% 47.81% 58.50%
(Present-value comparison) You are offered $1,400 today, $5,000 in 12 years, or $29,000 in 20 years

(Present-value comparison) You are offered $1,400 today, $5,000 in 12 years, or $29,000 in 20 years. Assuming that you can earn 13 percent on your money, which offer should you choose? a. What is the present value of $29,000 in 20 years discounted at 13 percent interest rate?

c.)“Give me $10,000 today and I'll return $16,000 to you in five years," offers your investment...

c.)“Give me $10,000 today and I'll return $16,000 to you in five years," offers your investment broker. To the nearest tenth of a percent, what annual interest rate is being offered? d.)How much money would you have to put away at the end of each year to have $1,600,000 when you retire 26 years from now if you can earn 4% on your money? e.)How much can be accumulated if $2,375 is deposited at the end of each month for...