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Black_prince [1.1K]
2 years ago
13

In the year 2000, McDonald's was running a game called Monopoly. For every item you purchased at the restaurant, you earned a ti

cket to enter into the game. The highest prize offered two options: (a) $1,000,000 in one installment; or (b) $100,000 to be paid annually during 15 years, starting with one installment at the year 2000. Suppose that the interest rate is 10%. Which option would a savvy financial investor prefer
Business
1 answer:
mamaluj [8]2 years ago
5 0

Option a - $ 1000000 in one instalment

Option b - $100000 to be paid annually during 15 years, starting with one instalment at the year 2000

Interest rate = 10%

Which option would a savvy financial investor prefer

PV of Option a = 1000000 * 1 = $ 1000000

PV of option b = 100000 * PVIFA(10%,15)

PV of option b = 100000 * 7.6060795 = $ 760608

The PV of option a is higher, hence prefer the option a

Learn more about financial investor here brainly.com/question/25572872

#SPJ4

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