YOU DECIDE TO SELL YOUR CAR AND A FRIEND HAS OFFERED YOU $1,000 NOW...

7. You decide to sell your car and a friend has offered you $1,000 now and four annual payments of $1,800, with the annual payments starting at the end of the second year. Your other option is to sell the car to a dealer today for $6,450. Assuming your friend will not default on the payments and the market annual interest rate is 8%, should you sell your car to your friend? A) Yes; present value of the friend’s offer is $6,520 B) Yes; present value of the friend’s offer is $6,624 C) No; present value of the friend’s offer is $5,134 D) No; present value of the friend’s offer is $5,624 E) Both options offer the same value