# Much to your surprise, you were selected to appear on the TV show, “The Price is Right.” As a result of your prowess in identifying how many rolls of toilet paper an average American family keeps on hand, you win the opportunity to choose one of the following: \$2,000 today, \$10,000 in 10 years, or \$31,000 in 29 years. Assuming you can earn 16% on your money, which should you choose? If you are offered \$10,000 in ten years and can earn 16% on your money, what is the present value of \$10,000?

Question1:

Much to your surprise, you were selected to appear on the TV show, “The Price is Right.” As a result of your prowess in identifying how many rolls of toilet paper an average American family keeps on hand, you win the opportunity to choose one of the following: \$2,000 today, \$10,000 in 10 years, or \$31,000 in 29 years. Assuming you can earn 16% on your money, which should you choose? If you are offered \$10,000 in ten years and can earn 16% on your money, what is the present value of \$10,000?

Question 2:

After placing \$13,000 in a savings account paying annual compound interest of 4%, Leona will accumulate what amount if she leaves the money in the bank for 3 years?

Question 3:

To pay for your education you have taken out \$28,000 in student loans. If you make monthly payments over 13 years at 6% compounded monthly, how much are your monthly student loan payments?

Question 4:

What is the present value of a \$650 perpetuity discounted back to the present at 12%? What is the present value of the perpetuity?

Question 5:

You are given three investment alternatives to analyze. The cash flows from these three investments are as follows:

What is the present value of each if these three investments if the appropriate discount rate is 13%?