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Finance

Your neighbor is buying a new recreational vehicle (RV). He has the following options to finance the RV:

I. Pays $53,000 today (in time 0)

II. Buy under a "three annual payment program" where you make annual payments of $20,000 (in time 1, 2 and 3).

III. Make 84 monthly payments over 7 years of $800 payable at the end of each month.

(a) If the interest rate is 7% annually, calculate the present value of each option.

(b) At what interest rate do Option II and Option III have the same present value?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92260705

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