Your parents are interested in getting advice on what is the best outcome at the end of a six-year period for investing a sum of money in the following options, given a 9% per annum earning rate. What is the preferred option? a. Invest $8,000 as a lump sum today. b. Invest $5,000 at the end of each of the next six years. c. Invest a lump sum of $6,000 today and $1,000 at the end of each of the next six years. d. Invest $1,200 at the end of years one, three and five. Please show all the calculations step by step

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A:

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Q: invest

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.