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Determine the present value for the options

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Alex Meir recently won a lottery and has the option of receiving one of the following three prizes: (1) $80,000 cash immediately, (2) $29,000 cash immediately and a six-period annuity of $8,700 beginning one year from today, or (3) a six-period annuity of $16,200 beginning one year from today. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Question 1. Assuming an interest rate of 6%, determine the present value for the above options. Which option should Alex choose?

Question 2. The Weimer Corporation wants to accumulate a sum of money to repay certain debts due on December 31, 2030. Weimer will make annual deposits of $155,000 into a special bank account at the end of each of 10 years beginning December 31, 2021. Assuming that the bank account pays 7% interest compounded annually, what will be the fund balance after the last payment is made on December 31, 2030?

 

Reference no: EM132691206

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