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You have the choice of receiving $ 60,000 now or $ 33,000 now and another $...

You have the choice of receiving $ 60,000 now or $ 33,000 now and another $ 42,000 seven years from now. In terms of​ today's dollar, which choice is better and by how​ much? Money is worth 6 % compounded annually. Which choice is​ better? A. The choice of $ 33,000 now and $ 42,000 in seven years is better. B. They are equal in value. C. The choice of $ 60,000 now is better.

The better choice is greater than the alternative choice by _$ in terms of today's dollars

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Answer #1

The question is solved with the concept of time value of money. The amount which will be received after seven years will be pulled back @ 6%.

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