$1,000,000) or immediate payment of $400,000. Suppose the interest rate is 7 percent. Which would yo To make the right choice, you need to calculate the present value of the stream of payments. a. How much is the present value of this million-dollar prize? b. Discuss elaborately vour analysis based on vour calculations

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A: Option 1: Receives $1000 at 10% today But if we invest the $1000 received today for 5 years

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A: Please refer to the image below

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A: Please refer to the image below.

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.