Calculation Problem (10 Points): Suppose you have three choices now. As shown in the following...
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- Calculation Problem (10 Points): Suppose you have three choices now. As shown in the following table, in Choice One, I will give you $200 today; In Choice Two, I will give you $220 in Year 2; In Choice Three, I will give you $50 today, $90 in Year 1, and $60 in Year 3. Please discuss which choice is the best under the following three scenarios: (1) Interest rate is always 5%; (2) Interest rate is always 3%; (3) Interest rate is 2% in Year 1, and 5% in Year 2.
|
| Choice One | Choice Two | Choice Three |
| Today | $200 |
| $50 |
| Year 1 |
|
| $90 |
| Year 2 |
| $220 | $60 |
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