Option 1You have two options
1) to receive £300 at Y/E forever
2) receive £400 at Y/E for 25 years
Market interest rate is 6%
How do i find the present values?
To receive $300 annually forever, the annual interest must be $300.
If is the present value, the interest for one year is .
. . We have: .
To receive $400 annually for 25 years, use the formula: .
. . where: .
We have: .