There are 3 options that you have to choose. First, you can receive $100,000.00 per year ...

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There are 3 options that you have to choose. First, you can receive $100,000.00 per year for the next 2 years. Second, you can receive 27,000.00 cash today plus 85,000.00 per year for the next 2 years. Or you can receive $9,500 per year in perpetuity. The interest rate is 5% compounded monthly. Which option would you take? Explain why and show all formula and workings.

    • 8 years ago
    For each option, we calculate the PV and then compare them. Option 1: PMT = 100000, ι = 5/(12 * 100) = 0.004167, p = 12 * 2 = 24 ...
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