(B) Mc Gregor has just won a prize in a game show with the winning prize worth RM30 million. However, he was given two options to receive those prizes: a. Option 1: Receive RM1 million for next 30 years beginning now. b. Option 2: Receive RM1.5 million each year from year 1 until 10" year, RM500,000 from 11 to 20 years and RM1 million from 21 until 30 years. Required : () Suggest which of the two is the better option and assuming the interest rate at 7 percent for the next 30 years. (Please show your work). (ii) If she is offered third options, which is to receive RM12 million one lumD Sum amount now. What is the rate of interest, that makes Mc Gregor indifferent to choose either option one or three (Show the answer to two decimal points)?
(B) Mc Gregor has just won a prize in a game show with the winning prize worth RM30 million. However, he was given two options to receive those prizes: a. Option 1: Receive RM1 million for next 30 years beginning now. b. Option 2: Receive RM1.5 million each year from year 1 until 10" year, RM500,000 from 11 to 20 years and RM1 million from 21 until 30 years. Required : () Suggest which of the two is the better option and assuming the interest rate at 7 percent for the next 30 years. (Please show your work). (ii) If she is offered third options, which is to receive RM12 million one lumD Sum amount now. What is the rate of interest, that makes Mc Gregor indifferent to choose either option one or three (Show the answer to two decimal points)?
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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Transcribed Image Text:(B) Mc Gregor has just won a prize in a game show
with the winning prize worth RM30 million. However,
he was given two options to receive those prizes:
a. Option 1: Receive RM1 million for next 30 years
beginning now.
b. Option 2: Receive RM1.5 million each year from
year 1 until 10" year, RM500,000 from 11 to 20 years
and RM1 million from 21 until 30 years.
Required :
() Suggest which of the two is the better option and
assuming the interest rate at 7 percent for the next
30 years. (Please show your work).
(ii) If she is offered third options, which is to receive
RM12 million one lumD Sum amount now. What is
the rate of interest, that makes Mc Gregor indifferent
to choose either option one or three (Show the
answer to two decimal points)?
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