Best Choice of Investment
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1. If you require a 12 percent return on your investment, which would you prefer?
a. Present value of $8,000 today
b. Present value of $15,000 received in 5 years at 12%
c. Present value of a 15 year, $1,000 annuity at 12%:
Explain what is the best choice and why it is the best.
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Solution Summary
The best choice of investment is examines for the present value.
Solution Preview
We calculate the present value of each of the payments
a. you get the money today, so pv = 8000
b. pv = ...
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