Question

You are offered the choice between the following options: a) Get $3,200 each year for 10...

You are offered the choice between the following options:

a) Get $3,200 each year for 10 years. First payment after the first year.

b) Get $7,000 today, and thereafter $3,000 each year for 5 years. First payment after the first year.

c) Get $4,000 each year for 10 years. First payment after 5 years.

The annual interest rate is 8%. Calculate the present values of those three options. Which one would you choose and why? Show your work

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