What is the most valuable prize with a given interest rate

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Reference no: EM132058632

You won a breakfast cereal competition. You can choose one from the following prizes:

1) $200,000 today

2) $300,000 at the end of 5 years

3) $24,000 a year forever

4) $37,500 a year for the next 10 years

5) $12,500 next year and increasing thereafter by 6% a year forever

If the interest rate is 12% what is the most valuable prize?

If the interest rate is 8% what is the most valuable prize?

Reference no: EM132058632

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