Your mom is thinking of retiring. Her retirement plan will pay her either $225,000 immediately on retirement or $315,000 five years after the date of her retirement. Which alternative should she choose if the interest rate is: a. 0% per year? b. 8% per year? c. 20% per year?
Your mom is thinking of retiring. Her retirement plan will pay her either $225,000 immediately on retirement or $315,000 five years after the date of her retirement. Which alternative should she choose if the interest rate is: a. 0% per year? b. 8% per year? c. 20% per year?
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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Transcribed Image Text:Your mom is thinking of retiring. Her retirement plan will pay her either $225,000 immediately on retirement or $315,000 five years after the date of
her retirement. Which alternative should she choose if the interest rate is:
a. 0% per year?
b. 8% per year?
c. 20% per year?
a. 0% per year?
If the interest rate is 0% per year, the PV of the amount to be received five years after retirement is $ (Round to the nearest dollar.)
Which alternative should your mom take in this case? (Select the best choice below.)
A. Take the money now.
b. 8% per year?
If the interest rate is 8%, the PV of the amount to be received five years after retirement is $ (Round to the nearest dollar.)
Which alternative should your mom take in this case? (Select the best choice below.)
A. Take the money now.
B. Wait until 5 years after retirement.
A. Take the money now.
B. Wait until 5 years after retirement.
c. 20% per year?
If the interest rate is 20%, the PV of the amount to be received five years after retirement is $
Which alternative should your mom take in this case? (Select the best choice below.)
(Round to the nearest dollar.)
B. Wait until 5 years after retirement.
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