Question 3. You participate in an Instagram contest and you are offered the following prizes. If...
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Question 3. You participate in an Instagram contest and you are offered the following prizes. If the annual interest rate is 8% APR, which one is the most valuable prize? Show your calculations for each alternative, in writing and in Excel. (20 points) A) $150,000 now. B) $170,000 at the end of 6 years (t=6). C) $10,000 per year forever, the first payment starts today (t=0). D) $9,000 a year forever (starting at t=1) that will grow forever at a 2% rate. E) $800,000 at the end of 20 years (t=20). F) 8 semi-annual payments of $14,000 where the first payment starts at the end of the first semester (t=1). G) $14,000 a year, starting at the beginning of this year (t=0) for 12 payments. H) $70,000 in year 2 and $50,000 in year 4. Question 3. You participate in an Instagram contest and you are offered the following prizes. If the annual interest rate is 8% APR, which one is the most valuable prize? Show your calculations for each alternative, in writing and in Excel. (20 points) A) $150,000 now. B) $170,000 at the end of 6 years (t=6). C) $10,000 per year forever, the first payment starts today (t=0). D) $9,000 a year forever (starting at t=1) that will grow forever at a 2% rate. E) $800,000 at the end of 20 years (t=20). F) 8 semi-annual payments of $14,000 where the first payment starts at the end of the first semester (t=1). G) $14,000 a year, starting at the beginning of this year (t=0) for 12 payments. H) $70,000 in year 2 and $50,000 in year 4.
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To determine the most valuable prize among the given alternatives we need to calculate the present value of each option using the annual interest rate ... View the full answer
Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
Posted Date:
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