Question

You are oflered $80,000 today or $300,000 in 12 yeass Assuming that you can eam 15 percenf on your moner, ufich thould you choose? If you are ollered 5300,000 in 12 years and you can eam 15 percent on your money, what is the present value of 5300,000 ? (Round to the nearest cent)

Answer 1

To choose between $80,000 today or $300,000 in 12 years, you compare their present values. The present value of $300,000 in 12 years at a 15% interest rate is $77,139.12, so it would be better to choose $80,000 today. The present value of $530,000 in 12 years at a 15% interest rate is $136,950.93.

Step-by-step explanation:

To determine whether you should choose $80,000 today or $300,000 in 12 years, you need to compare the present value of the future amount to the $80,000. Assuming a 15% annual interest rate, the present value of $300,000 in 12 years is calculated using the formula:

PV = FV / (1 + r)^n

where PV is the present value, FV is the future value, r is the interest rate, and n is the number of years. Plugging in the values, we get:

PV = 300,000 / (1 + 0.15)^12 = $77,139.12

Since $77,139.12 is less than $80,000, it would be better to choose $80,000 today.

To calculate the present value of $530,000 in 12 years with a 15% interest rate, we use the same formula:

PV = 530,000 / (1 + 0.15)^12 = $136,950.93 (rounded to the nearest cent).