In year 2020, you won the championship in a Singapore TV show. You can choose any one (1) of the following reward packages.Option 1: You will receive an amount of 10,000 in 10 years.Option 2: Starting from today, you will get annual payments of 900 for 10 years.Option 3: Beginning 1 year from today, you will get annual payments for 8 years. The first payment is 1000 and the amount would increase 3% yearly. Compute the present value of each option if the discount rate you used is 5%. Assume that the discount rate is not given. Show your opinion on how to select the option to maximize your reward in the year of 2020.
In year 2020, you won the championship in a Singapore TV show. You can choose any one (1) of the following reward packages.Option 1: You will receive an amount of 10,000 in 10 years.Option 2: Starting from today, you will get annual payments of 900 for 10 years.Option 3: Beginning 1 year from today, you will get annual payments for 8 years. The first payment is 1000 and the amount would increase 3% yearly. Compute the present value of each option if the discount rate you used is 5%. Assume that the discount rate is not given. Show your opinion on how to select the option to maximize your reward in the year of 2020.
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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In year 2020, you won the championship in a Singapore TV show. You can choose any one (1) of the following reward packages.
Option 1: You will receive an amount of 10,000 in 10 years.
Option 2: Starting from today, you will get annual payments of 900 for 10 years.
Option 3: Beginning 1 year from today, you will get annual payments for 8 years. The first payment is 1000 and the amount would increase 3% yearly.
Compute the
Assume that the discount rate is not given. Show your opinion on how to select the option to maximize your reward in the year of 2020.
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