Suppose that you are given a choice of receiving your scholarship in the amounts of $5,000 today and $5,000 next year, or receiving $9,000 all at once today. if the interest rate is 10%, which choice should you choose in order to maximize the present value of your scholarship?

Option 1 is more preferable.

Step-by-step explanation:

As provided, the two options are:

Option 1

$5,000 today and $5,000 next year

The prevailing interest rate is 10%

Therefore, present value of this option

=

=

Option 2

Receiving $9,000 today straight once for all the dues.

Its present value shall be

= 9,000

Since the net present value is more of option 1, the Option 1 shall maximize the value by $545 extra = $9,545 - $9,000