EXERCISE 5: FUTURE VALUE OF A SINGLE SUM VERSUS AN ANNUITY You have a choice between receiving (1) a $50,000 payment today, and (2) a $7,500 annuity for the next 10 years and a lump-sum amount of $20,000 at the end of the 10th year. If money is worth 10%, which option is the most attractive? EXERCISE 6: PRESENT VALUES AND FUTURE VALUES Suppose you were offered the following options: a 10-year annuity of $10,000 at the end of each year or a $60,000 lump-sum payment today. If you want to make 10%, which option would you prefer? To answer this question, calculate the present value of both options and the future value of both options.
EXERCISE 5: FUTURE VALUE OF A SINGLE SUM VERSUS AN ANNUITY You have a choice between receiving (1) a $50,000 payment today, and (2) a $7,500 annuity for the next 10 years and a lump-sum amount of $20,000 at the end of the 10th year. If money is worth 10%, which option is the most attractive? EXERCISE 6: PRESENT VALUES AND FUTURE VALUES Suppose you were offered the following options: a 10-year annuity of $10,000 at the end of each year or a $60,000 lump-sum payment today. If you want to make 10%, which option would you prefer? To answer this question, calculate the present value of both options and the future value of both options.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Excercise 5
You must support your answer with both a present value comparison AND a
Transcribed Image Text:EXERCISE 5: FUTURE VALUE OF A SINGLE SUM VERSUS AN ANNUITY
You have a choice between receiving (1) a $50,000 payment today, and (2) a $7,500
annuity for the next 10 years and a lump-sum amount of $20,000 at the end of the
10th year. If money is worth 10%, which option is the most attractive?
Transcribed Image Text:EXERCISE 6: PRESENT VALUES AND FUTURE VALUES
Suppose you were offered the following options: a 10-year annuity of $10,000 at the
end of each year or a $60,000 lump-sum payment today. If you want to make 10%,
which option would you prefer? To answer this question, calculate the present value
of both options and the future value of both options.
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