In: Civil Engineering
Mr. Joshua Lacey set the track record in a meet at LSU. For this
achievement, he gets to choose
between a $250 cash prize paid immediately or $30 per year for 10
years. He already has
enough money for now so he decided on the 10 annual installments.
However, he is considering
the following two investment options:
a. Save the winnings for the first 3 years and then spend every
cent of the winnings in the
remaining 7 years that is collected.
b. Spend everything for the first 3 years then save the remaining 7
years of winnings collected.
i). Draw the cash flow diagram for each option (a) and (b).
ii). Also, if Bank plus is advertising that they can give him a
savings ROR of 11% per year, how much
would each option (a) and (b) payout after the installments end?
(10 pts)
Since there are some equations, I preferred a handwritten note. Results are tabulated in the answer for your easier understanding. Hope that it is clear for you and it really helped you.
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