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What is the future value of the lump sum

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Reference no: EM132234907

Kristi Jones has just contracted to sell land she inherited a few years ago. buyer is willing to pay $24,000 now(year 0) or the series of payments shown below. Kristi plans to invest any received payments in an account that earns 7% annual interest. She wants to buy a house in 5 yrs..WHat is the option that has the highest future value at the time? Year 1-Payment $2,000, Year 2 - Payment $4,000, Year 3- payment 6,000, Year 4- Payment - $8,000, Year 5-10,000.

a. What is the future value of the lump sum 5 years from now?

b. What is the future value of the mixed stream five years from now?

c. Based on your findings in parts a &b , which should Kristi take?

d. If Kristi could earn 10% rather than 7% on the funds, would your recommendation in part c. change ? Explain

Reference no: EM132234907

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