You will need at least $5,400 in 4 years and your godfather says he can either give you $5,400 all at once 4 years from now or he can deposit $1,350 in your savings account at the end of each year for the next 4 years. Your savings account earns 12% interest, compounded annually. Which option would be worth more to you 4 years from now, and how much more? (Euture Value of $1 Present Value of $1. Euture Value Annuity of $1. Present Value Annuity.of $1) Note: Use appropriate factor from the FV tables.
You will need at least $5,400 in 4 years and your godfather says he can either give you $5,400 all at once 4 years from now or he can deposit $1,350 in your savings account at the end of each year for the next 4 years. Your savings account earns 12% interest, compounded annually. Which option would be worth more to you 4 years from now, and how much more? (Euture Value of $1 Present Value of $1. Euture Value Annuity of $1. Present Value Annuity.of $1) Note: Use appropriate factor from the FV tables.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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Transcribed Image Text:You will need at least $5,400 in 4 years and your godfather says he can either give you $5,400 all at once 4 years from now or he can
deposit $1,350 in your savings account at the end of each year for the next 4 years. Your savings account earns 12% Interest,
compounded annually. Which option would be worth more to you 4 years from now, and how much more? (Future Value of $1
Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1)
Note: Use appropriate factor from the FV tables.
Multiple Choice
O
The $5,400 in 4 years will be worth $860 more than the annual deposits.
The annual deposits will be worth $860 more than the $5,400 in 4 years.
The $5,400 in 4 years will be worth $1,052 more than the annual deposits.
The annual deposits will be worth $1,052 more than the $5,400 in 4 years.
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