You have an opportunity to receive one payment. Which of the following opportunities is the best given 24% APR (compounding monthly)?
A) One that pays $1200 today
B) One that pays $1298 in 4 months
C) One that pays $1712 in 18 months
D) One that pays $2446 in 3 years
how should I solve this using the hp10bii+ calculator? Please show steps, thanks!
let me know if you need any clarification..
we have to compute the preset value under each of scenario | |||||
Put in calculator for each scenario - | |||||
Note: Monthly interest rate =24%/12=2% | |||||
A) | B) | C) | D) | ||
FV | 1200 | 1298 | 1712 | 2446 | |
N | 0 | 4 | 18 | 36 | |
I | 2% | 2% | 2% | 2% | |
PMT | 0 | 0 | 0 | 0 | |
Compute PV | ($1,200.00) | ($1,199.15) | ($1,198.67) | ($1,199.09) | |
therefore value today= | $1,200.00 | $1,199.15 | $1,198.67 | $1,199.09 | |
Since option A) has highest value therefore and = A) one that pays $1200 today | |||||
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