[lucylewicki]

Would you make 12 payments of $1200 at the beginning of each year for the next 12 years or a slingle lump sum payment of $10,000 today. If you had invesstment opportunities offering an 8 percent annual return which alternative would you prefer?

[ROLCAM]

I would chose the $10,000 to-day.


YEAR INVESTMENT A
10,000.00
1 10,800.00
2 11,664.00
3 12,597.12
4 13,604.89
5 14,693.28
6 15,868.74
7 17,138.24
8 18,509.30
9 19,990.05
10 21,589.25
11 23,316.39
12 25,181.70

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INVESTMENT B
1 1,200.00 1,296.00
2 2,496.00 2,695.68
3 3,895.68 4,207.33
4 5,407.33 5,839.92
5 7,039.92 7,603.11
6 8,803.11 9,507.36
7 10,707.36 11,563.95
8 12,763.95 13,785.07
9 14,985.07 16,183.87
10 17,383.87 18,774.58
11 19,974.58 21,572.55
12 22,772.55 24,594.36

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That would be $25,181.70 instead of $24,594.36. A betterment of $587.34.