For Winning First Prize In An Essay Contest You Are Offered A Choice Of Prizes A

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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