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Exercise 4 (10 points) You applied for a job in a local bank. As part...

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Finance

Exercise 4 (10 points)

You applied for a job in a local bank. As part of its evaluation process, you must take an examination on time value of money analysis. The question was to be able to solve the following case:

Which option would you choose, if you won the lottery, based on PV comparison?

  • Option A: a fixed payment of 2.5 million per year for 10 years at 8% interest rate compounded semiannually while the first payments will be at the beginning of the first year.
  • Option B: an immediate payment of 30 million today.

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