1. Laura James just won the lottery of $2.5 million dollars. She is given two options to receive her winnings after tax deductions: a) Take an annual payment for the next 10 years of $225,000; or b) Take a lump sum three times. $1,000,000 up front, & $500,000 each at the end of year 5 & 10 respectively. Requirement: Advise Laura on which option she should take based on your calculations using 5% interest rate.
1. Laura James just won the lottery of $2.5 million dollars. She is given two options to receive her winnings after tax deductions: a) Take an annual payment for the next 10 years of $225,000; or b) Take a lump sum three times. $1,000,000 up front, & $500,000 each at the end of year 5 & 10 respectively. Requirement: Advise Laura on which option she should take based on your calculations using 5% interest rate.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
![Laura James just won the lottery of $2.5 million dollars. She is given two options to
receive her winnings after tax deductions:
a) Take an annual payment for the next 10 years of $225,000; or
b) Take a lump sum three times. $1,000,000 up front, & $500,000 each at the end of
year 5 & 10 respectively.
1.
Requirement: Advise Laura on which option she should take based on your
calculations using 5% interest rate.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4056a517-600e-424a-8a1c-615b8fbe51e0%2F29f0ec4a-50a1-4af2-9103-ca6e1406b72f%2Fv2brl0n_processed.png&w=3840&q=75)
Transcribed Image Text:Laura James just won the lottery of $2.5 million dollars. She is given two options to
receive her winnings after tax deductions:
a) Take an annual payment for the next 10 years of $225,000; or
b) Take a lump sum three times. $1,000,000 up front, & $500,000 each at the end of
year 5 & 10 respectively.
1.
Requirement: Advise Laura on which option she should take based on your
calculations using 5% interest rate.
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