Your rich godfather has offered you a choice of one of the three following alternatives: $10,000 now; $2,000 a year for eight yeaers; or $24,000 at the end of eight years. assuming you could earn 11 percent annually, which alterantive should you coose? If you could earn 12 percent annually, would you still choose the same alterantive.© BrainMass Inc. brainmass.com October 24, 2018, 9:53 pm ad1c9bdddf
The future value of sums of money over eight years is computed.
Time Value of money
A) After a protracted legal case, Joe won a settlement that will pay him $11,000 each year for the next ten years. If the market interest rates are currently 5%, exactly how much should the court invest today, assuming end of year payments, so there will be nothing left in the account after the final payment is made?
B) Mary just deposited $33,000 in an account paying 7% interest. She plans to leave the money in this account for eight years. How much will she have in the account at the end of the seventh year?
C) Mary and Joe would like to save up $10,000 by the end of three years from now to buy new furniture for their home. They currently have $1500 in a savings account set aside for the furniture. They would like to make equal year end deposits to this savings account to pay for the furniture when they purchase it three years from now. Assuming that this account pays 6% interest, how much should the year end payments be?View Full Posting Details