Question

Which of the following would you prefer? $500 to be received in 10 years when rates...

Which of the following would you prefer?

$500 to be received in 10 years when rates are 8 percent

$300 today

$600 to be received in 12 years when rates are 8 percent

$700 to be received in 12 years when rates are 7 percent

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Answer #1
Answer: $700 to be received in 12 years when rates are 7 percent
Explanation:
$500 to be received in 10 years when rates are 8 percent
Present value = FV / (1+r)n
Present value = 500 / (1+0.08)^10
Present value = 500/2.15893
Present value = 231.60
$300 today
$600 to be received in 12 years when rates are 8 percent
Present value = 600/(1+0.08)^12
Present value = 600/2.51817
Present value = 238.27
$700 to be received in 12 years when rates are 7 percent
Present value = 700/(1+0.07)^12
Present value = 700/2.25219
Present value = 310.81
Out of four options , high Present value would be prefer
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