dmillionaire
New member
- Joined
- Sep 15, 2013
- Messages
- 49
23. The owner of a residential building lot has received two purchase offers. Mrs. A is offering a $20,000 down payment plus $40,000 payable in 1 year. Mr. B's offer is $15,000 down plus two $25,000 payments due one and two years from now. Which offer has the greater economic value if money can earn 9.5% compounded quarterly? How much more is it worth in current dollars?
so i'm kinda stuck on this question
i was trying for mrs.a
i = 9.5 / 2 = 2.375 = 0.02375%
n = 1 x 4 = 4
40 000 ( 1 + 0.02375) ^4 = 43937.53 + 20 000
= 63 937.53
i did about the same thing for mrs.b and im getting a difference of around 8000 , 9000 but i have the answer and the answer is
ANS: Mr. B's offer should be accepted since its current economic value is $2064.20 greater
need some help finding that answer , studying for a test at the moment
so i'm kinda stuck on this question
i was trying for mrs.a
i = 9.5 / 2 = 2.375 = 0.02375%
n = 1 x 4 = 4
40 000 ( 1 + 0.02375) ^4 = 43937.53 + 20 000
= 63 937.53
i did about the same thing for mrs.b and im getting a difference of around 8000 , 9000 but i have the answer and the answer is
ANS: Mr. B's offer should be accepted since its current economic value is $2064.20 greater
need some help finding that answer , studying for a test at the moment