Problem:
Your grandfather wants to award to you the portion of his estate allocated to you as an inheritance. He gives you three options to receive your cash: 1) $5,000 today; 2) $1,000 per year for the next eight years; or 3) $12,000 at the end of eight years. The intermediate-term money market is currently paying 11%.
Which inheritance option would be best? Why? How might your decision change if the money market is paying 12%?
Must show your work - you must apply objectives means to arrive at a conclusion. If you used Excel, list the formula you used to arrive at your answer. If you used a financial calculator, list the key strokes you used. Lastly, if you used the time value values in the appendix or used the time value formulas, show your calculations.