Question

lfredo has two offers for his grocery shop. The first offer is a cash paymernt of $60,000, and the second is a down payment of $10,000 with payments of $6,000 at the end of each semannua pe iod 5yen Assu g an nterest rate of 6% compounded s annual find tedne ence between the two pese t va s tate the ans er as an ab un value O $1,181.22 o $11,181.22 $18,783.268 〇$51,181 22

Answer 1

First offer is cash payment of $ 60,000 2 nd offer is down payment of $ 10,000 with payment of $ 6,000 at end of each semi annual period for 5 years, with interest rate of 6 % compounded semi annually. i.e, P = 6,000, r = 0.06, n = 2, t = 5 Therefore A = P (1 + r/n)^nt = 6000 (1 + 0.06/2)^10 = 8063.49 i.e, in 2nd offer total paid amount will be 10,000 + 70847.04 = $ 80847.04 Therefore Difference between two presents values = 80847.04 - 60,000 = $ 20,847.04 Approximately option c $ 18,783.28