In: Finance
Which of the following options would you choose to have if the rate of discount is 11 percent?
A) $500 in one year
B) $850 in two years
C) $920 in six years
D) $1800 in ten years
We will find the present values of the 4 options.
A) $500/(1.10) = $454.5455
B) $850/(1.10)^2 = $702.4793
C) $920/(1.10)^6 = $519.3160
D) $1800/(1.10)^10 = $693.9779
Answer = Option B