What is present value

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Your father offers you a choice of $135,000 in 13 years or $46,500 today. Use Appendix B as an approximate answer, but calculate your final answer using the formula and financial calculator methods.

a. 1. If money is discounted at 10 percent, what is the present value of the $135,000? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

2. Which offer should you choose?

$135,000 in 13 years

$46,500 today

b-1. Now assume the offer is $135,000 in 10 years or $46,500 today. What is the present value of the $135,000 at 10 percent for 10 years? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

b-2. Now, which offer should you choose?

$46,500 today

$135,000 in 10 years

Reference no: EM132030386

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