Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Question

there are only two options. either one loan number or the other loan number

 

Milly's father has offered to give her one of the following two options: 1. a cash gift of $1,000 now, or 2. an interest free loan of $15,000 now. The loan would be repaid in five equal annual payments over the next five years. Assume Milly's opportunity cost of funds is 14%. In present value terms, which option is better for Milly, and how much better is it? The loan, by $5,830.31 No answer text provided. The loan, by $3,700.76 No answer text provided.
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Transcribed Image Text:Milly's father has offered to give her one of the following two options: 1. a cash gift of $1,000 now, or 2. an interest free loan of $15,000 now. The loan would be repaid in five equal annual payments over the next five years. Assume Milly's opportunity cost of funds is 14%. In present value terms, which option is better for Milly, and how much better is it? The loan, by $5,830.31 No answer text provided. The loan, by $3,700.76 No answer text provided.
Milly's father has offered to give her one of the following two options: 1. a cash gift of $1,000 now, or 2. an interest free loan of $15.000 now. The loan would be repaid in five equal annual payments over the next five years. Assume Milly's opportunity cost of funds is 14%. In present value terms, which option is better for Milly, and how much better is it? The loan, by $5.830.31 No answer text provided. The loan, by $3,700.76 No answer text provided.
expand button
Transcribed Image Text:Milly's father has offered to give her one of the following two options: 1. a cash gift of $1,000 now, or 2. an interest free loan of $15.000 now. The loan would be repaid in five equal annual payments over the next five years. Assume Milly's opportunity cost of funds is 14%. In present value terms, which option is better for Milly, and how much better is it? The loan, by $5.830.31 No answer text provided. The loan, by $3,700.76 No answer text provided.
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Step 1: Define opportunity cost
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