ne of the following options and has asked for your help in terms of a payout from his trust fund: he can receive a total lump sum payout of R2 150 000 today, which can be invested and earn 4.5% per annum compounded annually or receive an annual payment of R225 000 per year for 14 years which he can invest at the same rate of return. He can invest the money and receive an interest rate of 6.9% per quarter compounded quarterly. Evaluate each option on a present value basis and advise him on which is the best option to take.
ne of the following options and has asked for your help in terms of a payout from his trust fund: he can receive a total lump sum payout of R2 150 000 today, which can be invested and earn 4.5% per annum compounded annually or receive an annual payment of R225 000 per year for 14 years which he can invest at the same rate of return. He can invest the money and receive an interest rate of 6.9% per quarter compounded quarterly. Evaluate each option on a present value basis and advise him on which is the best option to take.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Jeff has to make a decision on one of the following options and has asked for your help in terms of a payout
from his trust fund: he can receive a total lump sum payout of R2 150 000 today, which can be invested and
earn 4.5% per annum compounded annually or receive an annual payment of R225 000 per year for 14 years
which he can invest at the same rate of return. He can invest the money and receve an interest rate of 6.9%
per quarter compounded quarterly. Evaluate each option on a present value basis and advise him on which
is the best option to take.
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