Assume that your grandmother wants to give you generous gift. She wants you to choose which...

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Finance

Assume that your grandmother wants to give you generous gift.She wants you to choose which one of the following sets of cashflows you would like to receive: Option A: Receive a one-time giftof $10,000 today. Option B: Receive a $1600 gift each year for thenext 10 years. The first $1600 would be received 1 year from today.Option C: Receive a one-time gift of $20,000 10 years fromtoday.
Compute the Present Value of each of these options if you expectthe interest rate to be 2% annually for the next 10 years. Which ofthese options does financial theory suggest you should choose?Option A would be worth $_10,000___ today. Option B would be worth$_14_ today. Option C would be worth $ today. Financialtheory supports choosing Option _
Compute the Present Value of each of these options if you expectthe interest rate to be 5% annually for the next 10 years. Which ofthese options does financial theory suggest you should choose?Option A would be worth $ today. Option B would be worth$ today. Option C would be worth $__ today.Financial theory supports choosing Option _
Compute the Present Value of each of these options if you expectto be able to earn 8% annually for the next 10 years. Which ofthese options does financial theory suggest you should choose?Option A would be worth $__ today. Option B would be worth$ today. Option C would be worth $ today.Financial theory supports choosing Option _

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4.3 Ratings (845 Votes)

If interest rate is 2 Option 1 Present Value 10000 Option 2 Present Value 1600102 16001022 16001029 160010210 Present Value 1600 1 110210 002 Present Value 1600 8982585 Present Value 14372 Option 3 Present Value 2000010210 Present Value See Answer

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Assume that your grandmother wants to give you generous gift.She wants you to choose which one of the following sets of cashflows you would like to receive: Option A: Receive a one-time giftof $10,000 today. Option B: Receive a $1600 gift each year for thenext 10 years. The first $1600 would be received 1 year from today.Option C: Receive a one-time gift of $20,000 10 years fromtoday.Compute the Present Value of each of these options if you expectthe interest rate to be 2% annually for the next 10 years. Which ofthese options does financial theory suggest you should choose?Option A would be worth $_10,000___ today. Option B would be worth$_14___ today. Option C would be worth $____ today. Financialtheory supports choosing Option _______Compute the Present Value of each of these options if you expectthe interest rate to be 5% annually for the next 10 years. Which ofthese options does financial theory suggest you should choose?Option A would be worth $__________ today. Option B would be worth$__________ today. Option C would be worth $__________ today.Financial theory supports choosing Option _______Compute the Present Value of each of these options if you expectto be able to earn 8% annually for the next 10 years. Which ofthese options does financial theory suggest you should choose?Option A would be worth $__________ today. Option B would be worth$__________ today. Option C would be worth $__________ today.Financial theory supports choosing Option _______