Which prize is worth the most

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Question - Edge Finance are advertising a magazine subscription. All new subscribers have the opportunity to go into a prize draw for a choice of any one of the following prize options. Current interest rates stand at 8% per year. Based on present values, which prize is worth the most?

Prize A: $50,000 cash now

Prize B: 5 yearly payments of $11,500, the first payment is due at the end of the year (assume yearly compounding)

Prize C: $1,500 per month for 3 years, the first payment is due at the end of the month (assume monthly compounding)

a. Prize A

b. Prize B

c. Prize C

d. Either Prize B or Prize C since they are actually worth the same in today's dollars.

Reference no: EM133023931

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