5. Suppose that as a lottery prize you win a trip worth $8,000. You are uninterested in the trip, but under the terms of the prize you can collect the $8,000 in cash, but only if you do not redeem the prize for 3 years. If the interest rate is 5%, the present value of the prize is a) $6911 b) $7619 c) $8,000 d) $21,786

5. Suppose that as a lottery prize you win a trip worth $8,000. You are uninterested in the trip, but under the terms of the prize you can collect the $8,000 in cash, but only if you do not redeem the prize for 3 years. If the interest rate is 5%, the present value of the prize is a) $6911 b) $7619 c) $8,000 d) $21,786

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: wery year you pay your neighbor $150 to clean the gutters at your house. You saw ad on late night TV…

A: Cash flow:The sum of the total money is represented in the diagram. It represents the magnitude and…

Q: 2. A savings bank offered you 6% nominal interest compounded every 2 months You deposited $4,000. a)…

A: here we calculate the future value and the effective interest rate of the following , so by using…

Q: Robert wins $5,000,000 at the lottery; however, he is not going to receive the full prize…

A: To find the present value of future cash inflows, we discount the values of future cash inflows with…

Q: 2. You will keep $1,000 in savings for one year. What is the EAR of each of the following saving…

Q: Suppose a certain manufacturer deposits $3, 000 at the beginning of each 3 month period for 8 years…

A: Given:Deposit at the beginning of each 3 months: $3,000Interest rate: 8% compounded…

Q: None

A: Step 1:a.We have i = 12%, n = 12$600 (P/A, 12%,12) = 600 * 6.1944 PV = $3,716.62 Step 2:b.here we…

Q: Find the future value and total interest of the annuity. (Round to the nearest cent as needed.)…

A: The measure that determines the value of the asset currently at a date in the future based on its…

Q: 1) You have a goal of saving $1500 over 6 years. Assuming bank interest rates are 5%, What annual…

A: Here we calculate the annual deposit amount by the following method as follow;

Q: A state lottery gives a winner the choice of receiving the winning amount in equal monthly payments…

A: Present Value Of Annuity: An annuity is a regular cash inflow that happens at the end of each period…

Q: What is the definition of Annual Percentage Rate (‘APR’) for a loan? Why is it typicallydifferent…

A: There are various methods to calculate interest rates and the amount of interest varies according to…

Q: (a) Show the equation for determining the rate of return for buying alife membership. (b) What is…

A: Rate of return(ROR) is the proportion of the initial investment that is received after a certain…

Q: Cash Flow is based on the notion that a dollar paid in the future is less valuable than a dollar…

A: The objective of the question is to calculate the present value of two different loans. The present…

Q: 2) An annuity due in perpetuity pays X at the beginning of each year for 10 years and starting at…

A: Given the information: Present value = $3000 g = 2% i = 5% time, t= 10

Q: The problem describes a debt to be amortized. (Round your answers to the nearest cent.) A man buys…

A: The payment is made semi-annually. Thus, the time period is 24 semi-annual (12 years) period.…

Q: 1. How much must you deposit each year to have $20,000 at the end of 15 years with money worth 7%?

A: Future value = 20000 $ Time = 15 years Interest rate = 7 %

Q: 1. Mary buys a 20 year annuity immediate for $100,000 subject to 6% effective annual interest rate.…

Q: Which of the following coupon bonds have the highest yield to maturity (YTM)? Notation: P = Current…

A: Bond refers to the financial instrument that firms or organizations issue to the investors who want…

Question

5. Suppose that as a lottery prize you win a trip worth $8,000. You are uninterested in
the trip, but under the terms of the prize you can collect the $8,000 in cash, but only if
you do not redeem the prize for 3 years. If the interest rate is 5%, the present value of the
prize is
a) $6911
b) $7619
c) $8,000
d) $21,786

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

QUESTION 4 A cash flow consists of $100 income at the end of Year 1, $200 at the end of Year 2, $300 at the end of Year 3, and so forth for ten years. What is the equivalent uniform annual cash flow? Use i = 10%.
1. How much would be in your account in 10 years after depositing $2000 now? The annual interest rate is 8% 2. How long will it take $500 to reach $10,000 when it grows at 8 percent per year? 3. At age 15 you invest $5,000 into a mutual fund. If you gain 25000 at age 40, the annual interest rate is?
5.What rate of simple interest will make a principal double itself in 6 years. a)16.67% b)8.33% c)33.33% d)4.16%
Topic: Annuities Due Formulas: Future value- F=C [(1+i)^n -1/i] (1+i) Present value- P=C [1-(1+i)^-n/i] (1+i) P.S - Use manual solving thank you!!
Don
Ordinary annuity payment. Fill in the missing annuity in the following table for an ordinary annuity stream: Number of Payments or Years 6 21 33 15 Annual Interest Rate 9% 4% 6% 10% Future Value $0.00 $24,000.00 $0.00 $98,433.34 Annuity (Round to the nearest cent.) $ (Round to the nearest cent.) $(Round to the nearest cent.) (Round to the nearest cent.) Present Value $24,000.00 $0.00 $150,000.00 $0.00
2. If we deposit $12000 at the end of year 0 into the bank with the annual interest rate of 6%. How much money will we have at the end of year 2? Draw the cash flow diagram.
1
Provide answers in the form of a percentage to three decimal places . (a).What is the effective annual interest rate of a 4 % nominal annual interest rate compounded daily . (b).What is the effective annual interest rate of a 2 % nominal annual interest rate compounded weekly ? (c).What is the effective annual interest rate of a 7 % nominal annual interest rate quarterly ?
Subject: finance
Question 1 Due to health reasons, Dave is considering early retirement. He currently has $700,000 in a self- managed retirement fund. He thinks he will need S40,000 per year during retirement. He intends to invest his retirement in a low-risk mutual fund which return 1.5% per year. How many years can he live off this retirement fund without the need to look for a job?
6.