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You are well aware of the time value of money concept. You now want to put that knowledge into practice by comparing two investment opportunities for yourself.
Assuming the same investment amounts are needed today for both opportunities and all other conditions are identical for the two investments.
Opportunity 1 – You will get $12,000 cash return one year later.
Opportunity 2 – You will get $1,000 cash return each month for the next twelve months, the first $1,000 comes in at the end of each month starting from now.
Which of the following statements is NOT true:
1. You can make a comparison by calculating the Future Value for both opportunities
2. Opportunity 1 will give you a better return.
3. You can make a comparison by calculating the Present Value for both opportunities
4. Opportunity 2 will give you a better return.