Greatest present value-which is the most valuable prize

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Reference no: EM131089311

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

A. A perpetual stream of annual payments of $1,000 starting in one year.

B. A perpetual stream of annual payments starting at $500 in one year and increasing at 5% per year thereafter.

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

D. Five annual payments of $2,800 - the first payment occurs one year from today.

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

Reference no: EM131089311

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