John Johnson is an avid coin collector. He has been noting the rapid rise in prices for coins minted in the 19th century. some of the best coins from that time period have been increasing in value by 12% per year. John has the rare opportunity to purchase several impressive coins from a reputable dealer. The dealer has offered to sell the coins to john for $65,000 today. As an alternative, John can put down $10,000 towards the purchase today and buy the coins outright for an additional $89,500 in 4 years. assume an annual discount rate of 12 %. assuming John has the cash for either deal, which should he take?

Answer rating: 100% (QA)

To determine which option John should choose we can calculate the present value of the two alternati... View the full answer