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(Present value comparison) Much to your surprise, you were selected to appear on the TV show "The Price is Right". As a result of your prowess in identifying how many rolls of toilet paper a typical American family keeps on hand, you win the opportunity to choose one of the following: $1,900 today, $7,000 in 10 years, or $25,000 in 29 years. Assuming that you can earn 16 percent on your money, which should you choose?

(A) If you are offered $7,000 in 10 years and you can ear 11% on your money, what is the present value of $7,000?

(B) If you are offered $25,000 in 29 years and you can earn 11 percent on your money, what is the present value of $25,000?

(C) Which offer should you choose?

Financial Management, Finance

  • Category:- Financial Management
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