Your uncle offers you a choice of $105,000 in 10 years or $47,000 today. If money is discounted at 9 percent, which should you choose?
The choice of $47,000 today should be preferred over $105,000 in 10 years.
Future value (FV) = $105,000
Interest Rate (i) = 9%
Period (n) = 10 year
The present value of $105,000 in 10 years is $44,353.13 which is lower than $47,000 today. Thus, the option of $47,000 today should be chosen.
Question: Beverly Hills started a paper route on January 1. Every three months, she deposits $550 in her bank account, which earns 8 percent annually but is compounded quarterly. Four years later, she used the entire balance in her bank account to invest in an investment at 7 percent annually. How much will she have after three more years?
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