3. (10 points). Mary owns some land. She puts it up for sale, and receives two...

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3. (10 points). Mary owns some land. She puts it up for sale, and receives two offers. The first offer is to pay her a downpayment (right now) of $20,000 plus a further payment of $30,000 five years from now. The second offer is to pay her no downpayment, but rather payments of $25,000 one year from now and $25,000 three years from now. Assume that interest rates will be j2 = 8% for the first two years, and j = 12% thereafter. Which offer should Marry accept? You must show your work. 3. (10 points). Mary owns some land. She puts it up for sale, and receives two offers. The first offer is to pay her a downpayment (right now) of $20,000 plus a further payment of $30,000 five years from now. The second offer is to pay her no downpayment, but rather payments of $25,000 one year from now and $25,000 three years from now. Assume that interest rates will be j2 = 8% for the first two years, and j = 12% thereafter. Which offer should Marry accept? You must show your work.

Answer rating: 100% (QA)

To determine which offer Mary should accept we need to compare the present val... View the full answer