1. Should you prefer to receive $100,000 right now or $10,000 at the end of each of the next 12 years?
a $100,000 now
b $10,000 at the end of each of the next 12 years
c The answer depends on the time value of money.
d Either alternative is equally valuable.
2. A friend of yours would like you to lend him $5,000 today to be paid back in 5 annual payments. What would be the equal annual end-of-year payment on this loan if you charge your friend 7% interest?
a $869.45
b $1,000.00
c $1,219.51
d $1,350.00