# Your grandfather has offered you a choice of one of the three following alternatives: \$7,500 now:...  3 a-2. Which alternative should you choose? \$31,000 received at end of nine years \$2,200 received each year for nine years. \$7,500 received now ints b-1. If you could earn 11 percent annually, compute the present value of each alternative: (Do not round intermediate calculations Round your final answers to 2 decimal places.) Hint Present Value 57,500 \$2,200 \$31,000 Print b-2. Which alternative should you choose? \$31,000 received at end of nine years \$2.200 received each year for nine years. C \$7500 received now, Prey 3 of 4 Next

 A-1 present value 7500 -7500 present value of alternative 2 = Using present value function in MS excel pv(rate,nper,pmt,fv,type) rate =10% nper = 9 pmt = 2200 fv = 0 type =0 PV(10%,9,2200,0,0) (\$12,669.85) present value of alternative 3 = Using present value function in MS excel pv(rate,nper,pmt,fv,type) rate =10% nper = 9 pmt = 0 fv = 31000 type =0 PV(10%,9,0,31000,0) (\$13,147.03) A-2 alternative 3 - 31000 received at the end of year 9 b-2 present value 7500 -7500 present value of alternative 2 = Using present value function in MS excel pv(rate,nper,pmt,fv,type) rate =11% nper = 9 pmt = 2200 fv = 0 type =0 PV(11%,9,2200,0,0) (\$12,181.50) present value of alternative 3 = Using present value function in MS excel pv(rate,nper,pmt,fv,type) rate =10% nper = 9 pmt = 0 fv = 31000 type =0 PV(11%,9,0,31000,0) (\$12,118.67) b-2 alternative 2 - 22000 received each year for 9 years

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