Homework Answers
| 1) | ||
| a) | PV of $4,500 now = | $ 4,500 |
| b) | PV of $1,000 for BOY 1 to 6 (annuity due) = 1000*1.12*(1.12^6-1)/(0.12*1.12^6) = | $ 4,605 |
| c) | PV of $8,000 at EOY 6 = 8000/1.12^6 = | $ 4,053 |
| 2) | Alternative [b] should be chosen as it has the highest | |
| PV. | ||
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