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Unformatted text preview: = $4,604.30 $10,000 in 12 years @ 10% FV = 10,000; rate = 10%; N = 12 years; PV =? PV = FV x PVIF 8%, 1 year = 10,000 x 0.31863 = $3,186.30 $10,000 in 15 years @ 11% FV = 10,000; rate = 11%; N = 15 years; PV =? PV = FV x PVIF 8%, 1 year = 10,000 x 0.20900 = $2,090.00 c. Your uncle offers you a choice of $25,000 in 50 years or $95 today? If money is discounted at 12%, which should you choose? Option 1: FV = 25,000; rate = 12%; N = 50 years; PV =? PV = FV x PVIF 8%, 1 year = 9,000 x 2.211 PV= $86.50 Option 2: $95.00 I would choose the second option of $95.00. c. Your aunt offers you a choice of $30,000 in 25 years or $850 today? If money is discounted at 11%, which should you choose? Option 1: FV = 30,000; rate = 11%; N = 25 years; PV =? PV = FV x PVIF 8%, 1 year 30,000 x 0.073608 PV= $2,208.24 Option 2: $850.00 I would choose the first option of $2,208.24....
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 Spring '08
 WILLIAMS

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