Question 2 You have £100,000. You are faced with three alternatives. Your discount rate is 8% per annum. The three alter
Posted: Wed May 18, 2022 11:02 pm
Question 2 You have £100,000. You are faced with three
alternatives. Your discount rate is 8% per annum. The three
alternatives from which you may choose are summarised as follows: •
Option A: £250,000 in 12 years with certainty • Option B: £1,000
every month for 10 years with monthly compounding • Option C £5,000
every year for life (indefinitely) For each option, calculate the
present value and then explain your choice for the best option [10
marks]
alternatives. Your discount rate is 8% per annum. The three
alternatives from which you may choose are summarised as follows: •
Option A: £250,000 in 12 years with certainty • Option B: £1,000
every month for 10 years with monthly compounding • Option C £5,000
every year for life (indefinitely) For each option, calculate the
present value and then explain your choice for the best option [10
marks]