Frank Rizzo is considering two investment options with seven-year lives. Option one pays $250 every quarter,...

Frank Rizzo is considering two investment options with seven-year lives. Option one pays $250 every quarter, the other pays $500 semi-annually. The option with the better value would be:

A) Both options are equally attractive

B) $250 every quarter

C) $500 semi-annually

Solutions

Expert Solution

The answer is

B) $250 every quarter

Quarterly payment is better due to the concept of time value of money

The sooner the payment is received, the higher will be its value

and hence, quarterly payment will have a better value although the amount received will be same.

jeff jeffy answered 1 year ago

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