1. Elma is offered the choice between the following three options: (i) She gets P3,200 each year for ten years, with the first payment due after one year. (ii) She gets P7,000 today, and thereafter P3,000 each year for five years, with the first payment after one year. (iii) She gets P4 000 each year for ten years, with the first payment only due after five years. The annual interest rate is 8%. Calculate the present values of the three options. What would you advise Elma to choose?
1. Elma is offered the choice between the following three options: (i) She gets P3,200 each year for ten years, with the first payment due after one year. (ii) She gets P7,000 today, and thereafter P3,000 each year for five years, with the first payment after one year. (iii) She gets P4 000 each year for ten years, with the first payment only due after five years. The annual interest rate is 8%. Calculate the present values of the three options. What would you advise Elma to choose?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 22P
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Transcribed Image Text:1. Elma is offered the choice between the following three options:
(1) She gets P3,200 each year for ten years, with the first payment due after one year.
(ii) She gets P7,000 today, and thereafter P3,000 each year for five years, with the first payment
after one year.
(iii) She gets P4 000 each year for ten years, with the first payment only due after five years. The
annual interest rate is 8%. Calculate the present values of the three options. What would you
advise Elma to choose?
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