Supposed you are offered the alternative of receiving either $2,007 at the end of five years or $1,500 today. There is no question that the $2,007 will be paid in full. Assuming the money is not needed in the next five years, you would deposit the $1,500 in an account that pays i% interest. (a.) What value of i% would make you choose to deposit the $1,500 today? (b.) What is the value of your investment at the end of every year (Year 1 to 5)? (c.) What would be your initial investment if interest rates are 3% and 9%? Consider Compounding Interest.
answer letter (a) and (b) only