Compute the present value of each alternative

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Reference no: EM131977541

Your grandfather has offered you a choice of one of the three following alternatives: $8,500 now; $3,000 a year for five years; or $41,000 at the end of five years. Use Appendix B and Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods.

a-1. Assuming you could earn 9 percent annually, compute the present value of each alternative: (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

a-2. Which alternative should you choose?

$41,000 received at end of five years

$3,000 received each year for five years

$8,500 received now

b-1. If you could earn 10 percent annually, compute the present value of each alternative: (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

b-2. Which alternative should you choose?

$41,000 received at end of five years

$3,000 received each year for five years

$8,500 received now

2. Determine the amount of money in a savings account at the end of 3 years, given an initial deposit of $8,500 and an annual interest rate of 12 percent when interest is compounded: Use Appendix A for an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

A. Annually Future Value:

B. SemiAnnually Future Value:

C. Quarterly Future Value:

Reference no: EM131977541

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