Imagine you received two offers. You need to decide which one means more money for you! OFFER #1: Right away, you receive $2,470,000. Also, you will receive 40 back-to-back payments of $1,235,000 each, six months apart, and the first one of these will take place in one year. The discount rate is 8 percent, with daily compounding. OFFER #2: Right away, you receive $27 million. And nothing else in the future. To make your decision, you need to first figure out how much Offer #1 is worth to you in today's dollars. The answer is: $_________ (Assume thirty days in each month and twelve months in each year.) (Do not round intermediate calculations. Round your final answer to 2 decimal places, e.g., 12.34.)
Imagine you received two offers. You need to decide which one means more money for you! OFFER #1: Right away, you receive $2,470,000. Also, you will receive 40 back-to-back payments of $1,235,000 each, six months apart, and the first one of these will take place in one year. The discount rate is 8 percent, with daily compounding. OFFER #2: Right away, you receive $27 million. And nothing else in the future. To make your decision, you need to first figure out how much Offer #1 is worth to you in today's dollars. The answer is: $_________ (Assume thirty days in each month and twelve months in each year.) (Do not round intermediate calculations. Round your final answer to 2 decimal places, e.g., 12.34.)
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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Question
Transcribed Image Text:Imagine you received two offers. You need to decide which one means more money for
you!
OFFER #1:
Right away, you receive $2,470,000. Also, you will receive 40 back-to-back payments of
$1,235,000 each, six months apart, and the first one of these will take place in one year.
The discount rate is 8 percent, with daily compounding.
OFFER #2:
Right away, you receive $27 million. And nothing else in the future.
To make your decision, you need to first figure out how much Offer #1 is worth to you in
today's dollars. The answer is: $
(Assume thirty days in each month and twelve months in each year.)
(Do not round intermediate calculations. Round your final answer to 2 decimal places,
e.g., 12.34.)
Present value
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