A winning lottery ticket offers the following two options: Option 1: A single payment of $5,000,000 today or Option 2: $2,500,000 today followed by annual payments of $1,000,000 for the next three years. a. If money can earn 6.9% compounded quarterly, which option should the winner select? O The winner should select the payment plan. The winner should select the single payment today. b. How much better is the option selected in part (a) in current dollars? Number

A winning lottery ticket offers the following two options: Option 1: A single payment of $5,000,000 today or Option 2: $2,500,000 today followed by annual payments of $1,000,000 for the next three years. a. If money can earn 6.9% compounded quarterly, which option should the winner select? O The winner should select the payment plan. The winner should select the single payment today. b. How much better is the option selected in part (a) in current dollars? Number

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

See similar textbooks

Similar questions

You have just won a two-part lottery! The first part will pay you $50,000 at the end of each of the next 20 years. The second part will pay you $1,000 at the end of each month over the same 20 year period. Assuming a discount rate of 9%, what is the present value of your winnings? use a HP 10bII+ to solve it
you have just won the lottery and will receive $460,000 in one year. you will receive payments for 21 years, and the payments will increase 4 percent per year. if the appropriate discount rate is 11 percent, what is the present value of your winnings? Please explain how to solve using the financial calculator to show and explain steps thanks
Imagine that you won $100 million in the lottery and were offered the choice between two payment plans: Plan A: Receive $61 million in a lump sum today Plan B: Receive an initial payment of $1.5 million today and annual payments that increase by 5% annually over the next 29 years (30 payments total) a. Determine the net present value of each plan without discounting. Which plan is the better option? b. Assuming an interest rate of 4%, determine the future value of each plan at the end of the 29 years with discounting. Which plan is the better option?
You have just won the lottery and will receive $580,000 in one year. You will receive payments for 28 years, which will increase 3 percent per year. The appropriate discount rate is 11 percent. Required: What is the present value of your winnings? $51,626,112 $6,102,947 $6,357,236 $31,217 $51,626,112 Only typed answer and give fast
You have just won the lottery and will receive $1,000,000 in one year. You will receive payments for 35 years and the payments will increase by 4 percent per year. If the appropriate discount rate is 8 percent, what is the present value of (Do not round intermediate calculations and round your answer to 2 decimal places, 32.16.) your winnings? e.g., Present value
You are the lucky winner of the $30 million state lottery. You can take your prize money either as (a) 30 payments of $1 million per year (starting in one year), or (b) $15 million paid today. If the interest rate is 5.5%, which option should you take? Select one: a. Option a, as it is equivalent to 15 333 101 $ b. Option a, as it is equivalent to 15 141 074 $ c. Option b d. Option a, as it is equivalent to 15 372 451 $
Imagine you have just won the Ohio Vax-Million lottery! However, you are infomed that you have two options to get the award maney. option A pays $1,000,000 immediately. Option B pays $1,750,000 at the end of five years from now. Using a discount rate of 5 percent, based on present values, find the present value of the Option B. Which would you choose? m Nper (or N) =n*m Rate (or I/Y)=i/m PV PMT FV
A lottery corporation sells a ticket for a chance to win $500,000. If you win, the prize winnings will be spread out over time with your first payment of $150,000 today. The second payment of $ 150,000 would be released to you in a year, and the last payment of $200,000 would be released the following year. If you could earn 3.5% compounded annually, what is the value of the prize today?
Assume you win a lottery, and you are offered the following stream of payments by the lottery commission: $25,000 today, $32,000 one year from now, another $32,000 two years from now, and a final payment of $55,000 three years from now. You accept the offer. If you invest all of these proceeds at 6% compounded annually and extract nothing from the investment, how much will you have at the end of the fourth year? Excel Formula Please
The prize in last week’s lottery was estimated to be worth $90 million. If you were lucky enough to win, the payment will be $3.6 million per year over the next 25 years. Assume that the first installment is received immediately. If interest rates are 6%, what is the present value of the prize? If interest rates are 6%, what is the future value after 25 years? How would your answers change if the payments were received at the end of each year? How would your answers change if the interest rate was higher?
Consider the following three options: (1) receive a one-time payment $102 now, (2) receive a one-time benefit of $115 in 5 years (from now), (3) receive $2 every year forever. If the yearly discount rate is 2%, which option would yield the most revenue? O option 3 O option 2 O option 1 O options 1 and 3
You have just won a two-part lottery! The first part will pay you $50,000 at the end of each of the next 20 years. The second part will pay you $1,000 at the end of each month over the same 20 year period. Assuming a discount rate of 7%, what is the present value of your winnings? $658,683 $567,572 $529,303 $610,462 $495,048

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS