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Your parents have made you an offer you can't refuse. They're planning to give you part of your inheritance early. They've given you a choice. Option (a) They'll pay you $11,000 per year for each of the next seven years (beginning today) or Option(b) They'll pay you $11,000 per year paid semi-annually for each of the next seven years (beginning today) or Option (c) They'll give you their 2007 BMW M6 Convertible, which you can sell for $61,000 (guaranteed) today. If you can earn 7% annually on your investments, which should you choose? Explain the difference in the value of the annuity when the interest rate is the same and the total of payments is the same between option a and option b? Your answer must be specific, it is related to the time value of money Your parents have made you an offer you can't refuse. They're planning to give you part of your inheritance early. They've given you a choice. Option (a) They'll pay you $11,000 per year for each of the next seven years (beginning today) or Option(b) They'll pay you $11,000 per year paid semi-annually for each of the next seven years (beginning today) or Option (c) They'll give you their 2007 BMW M6 Convertible, which you can sell for $61,000 (guaranteed) today. If you can earn 7% annually on your investments, which should you choose? Explain the difference in the value of the annuity when the interest rate is the same and the total of payments is the same between option a and option b? Your answer must be specific, it is related to the time value of money
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Related Book For
Macroeconomics Principles and Applications
ISBN: 978-1133265238
5th edition
Authors: Robert e. hall, marc Lieberman
Posted Date:
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