Solution-Determining the most valuable prize

Determining the most valuable prize

Reference no: EM132509590

You can choose any one of the following prizes. If your discount rate is 10% (annual compounding), which is the most valuable prize?

A. A lump sum payment of $10,000 today.

B. A lump-sum payment of $25,000 at the end of 10 years.

C. $2,600 at the end of each year for 5 years

D. $1,000 at the end of each year forever (in perpetuity).

E. $530 next year and increasing thereafter by 5% a year forever (in perpetuity).

Reference no: EM132509590

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Determining the most valuable prize

Reference no: EM132509590

Reference no: EM132509590

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