Calculation is based on an annual effective interest rate

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Sydney wins a prize. She has a choice of receiving a payment of $160,000 immediately or of receiving a deferred perpetuity with $10,000 annual payments, the first payment occurring in exactly four years. Which has a greater present value if the calculation is based on an annual effective interest rate is 5%? How about if the annual effective rate used is 6%?

Reference no: EM13727481

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