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stranahan stranahan
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Posts: 3324
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2 years ago
Which of the following is greater (answers rounded to the nearest cent)?
A) A future value of $331.00 three years from today, given an interest rate of 10% per year
B) A present value of $248.69
C) An ordinary annuity of $100.00 per year for three years discounted at 10% per year
D) You would be indifferent to the three choices since they all have the same present value when using an interest rate of 10% per year.
Textbook 

Financial Management: Core Concepts


Edition: 2nd
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waspchichesterwaspchichester
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Posts: 253
2 years ago
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D -- Each choice has a PV of $248.69 = PMT × (1 - (1/(1 + r)n)/r)
   = $100 × (1 - (1/(1.10)3)/.10)
   = (FV/(1 + r)n) = ($331/(1 + .10)3)

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2 years ago
Thank you very much for this. It's really helpful.
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Thank you so much!
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