Comparison of Alternatives
Darlene Page's grandparents want to give her some money when she graduates from high school. They have offered Darlene the following three choices:
a. Receive $16,000 immediately. Assume that interest is compounded annually.
b. Receive $2,400 at the end of each six months for four years. Darlene will receive the first check in six months.
c. Receive $4,640 at the end of each year for four years. Assume that interest is compounded annually.
Required:
Darlene wants to have money for a new car when she graduates from college in four years. Assuming an interest rate of 8%, what option should she choose to have the most money in four years?