Question

Your grandfather would like to share some of his fortune with you. He offers to give you money under one of the following scenarios​ (you get to​ choose):

1. $7,750 per year at the end of each of the next

seven years

2. $48,750 ​(lump sum) now

3. $100,050 ​(lump sum) seven years from now

Reference Present Value of $1 eriods 1% 2% 3% 6% 4% 0.962 0.925 5 % 7% 8% 9% 10% 12% 14% 15% 16% 18% 20% 1 0.990 0.980 0.971 0.961 0.951 0.980 0.961 0.942 0.924 0.971 0.952 0.943 0.890 0.840 0.792 0.747 0.935 0.926 0.917 0.842 0.772 0.708 0.650 0.909 0.826 0.893 0.877 0.870 0.756 0.658 0.862 0.743 0.641 0.552 0.847 0.718 0.609 0.833 0.943 0.907 0.873 0.857 0.797 0.769 0.694 0.579 0.482 0.402 0.915 0.889 0.864 0.816 0.763 0.794 0.735 0.681 0.751 0.712 0.675 4 0.888 0.683 0.621 0.855 0.823 0.636 0.567 0.592 0.572 0.516 0.906 0.863 0.822 0.784 0.713 0.519 0.497 0.476 0.437 0.942 0.888 0.837 0.813 0.790 0.760 0.746 0.711 0.705 0.666 0.630 0.596 0.564 0.507 0.456 0.432 0.410 0.370 0.335 0.376 0.327 0.933 0.623 0.582 7 0.871 0.665 0.583 0.547 0.513 0.452 0.400 0.354 0.314 0.279 0.540 0.500 8 0.923 0.853 0.789 0.731 0.677 0.627 0.502 0.467 0.404 0.351 0.305 0.266 0.225 0.191 0.233 0.914 0.837 0.766 0.460 0.703 0.676 0.544 0.424 0.361 0.308 0.284 0.263 0.227 0.645 0.592 0.194 10 0.905 0.820 0.744 0.614 0.558 0.508 0.463 0.422 0.386 0.322 0.270 0.247 0.162 0.650 350 0.527 0.497 11 0.896 0.804 0.722 0.585 0.475 0.429 0.388 0.287 0.237 0.215 0.195 0.162 0.135 12 0.887 0.788 0.701 0.625 0.557 0.444 0.397 0.356 0.319 0.257 0.208 0.187 0.168 0.137 0.112 42 0.070. 0.772 O.c04. nAR0 0.200. 0.220. 0.10n n1AE n.00 Print Done

Answer 1

7750 a year at the and of each year of the next seven years 48750 now 100050 Seven year From Now Scenario 1 Scenario 2 Scenario 3 Rate = 8% Senatios Scenario 1 Scenario 2 Scenario 3 Calculations 7750*5.206 48750 100050*0.583 Present Value 40347 48750 58329 Scenario 3 Appears to be the best option base on 8% interest Rate , Its Present Values is the = 58329 7750 a year at the and of each year of the next seven years 48750 now 100050 Seven year From Now Scenario 1 Scenario 2 Scenario 3 Rate = 12% Senatios Scenario 1 Scenario 2 Scenario 3 Calculations 7750*4.564 48750 100050*0.4523 Present Value 35371 48750 45223 Scenario 1 Appears to be the best option base on 12% interest Rate , Its Present Values is the = 48570