Question

On Joe Martin’s graduation from college , Joe’s uncle promised him a gift of $11,800 in...

On Joe Martin’s graduation from college , Joe’s uncle promised him a gift of $11,800 in cash or $780 every quarter for the next 4 years after graduation. Assume money could be invested at 8% compounded quarterly.

A. calculate the present value of options

Option 1 $______
Option 2 $______


B. Which offer is better for Joe?
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Answer #1

As the present value of payments in case of instalments is more, instalment payments is a better optioin for Joe

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