For winning first prize in an essay contest, you are offered a choice of prizes: a single payment of P dollars now; or B. two payments: $300 one year…
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For winning first prize in an essay contest, you are offered a choice of prizes:
A. a single payment of P dollars now; or
B. two payments: $300 one year from now and $400 two years from now.
To the nearest cent, what would P have to be in order for choices A and B to have equal value?
Assume that all payments will be deposited as soon as they are received into an account paying 5%
interest, compounded annually.
(A) $653.06
(B) $680.95
(C) $685.71
(D) $647.30
(E) $648.53
(F) $700.00
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