Define the present value

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An employee is planning to retire in the near future, the institution where he/she is working will provide $150,000 upon retirement. However, seeing that this amount of money may not suffice for covering the family's life commitments, the employee has thought to explore the retirement options that ABC bank is offering. ABC bank retirement product is offering $200,000 after 5 years of the date of the retirement.

Problem 1. Define the present value, list the formula and its main components.

Problem 2. Which alternative should you choose if the interest rate is:

a. 5% per year?
b. 10% per year?
c. 25% per year?

Reference no: EM132969764

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