Congratulations! You are the sole winner of the $10 million jackpot lottery. You can choose to takethe lump sum option of $2.75 million today (after taxes) or accept 20 annual payments of $250,000(also after taxes). Assume an annual interest rate of 6%. This is a Present Value to Present Valuecomparison. We know the present value of a lump sum payment is 2.75 million. Using the FinanceCalculator, what is the present value of all the annual payments combined over those 20 years?

Given information: Annual payout (PMT) = $250,000 Number of periods (N) = 20 Interest rate per…

Answered: Congratulations! You are the sole…

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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Similar questions

You have a chance to buy an annuity that pays $50,000 at the beginning of each year for 15 years. You could earn 10.0% on your money in other investments with equal risk. What is the most you should pay for the annuity? You are not required to show calculations. However to receive credit you must provide the inputs used (N, PMT, FV, I/Y, PV) to solve. If you utilize a template, you can copy and paste the section used in the submission. $418,334.37 $750,000.00 $380,303.98
You are planning to buy a CD for $1,352. You will receive $1,500 in 2 years. Use a financial calculator to find the interest rate you will receive on that investment, assuming annual compounding. I can do this manually, but can't seem to figure out how to correctly input this into a financial calculator using N, I/Y, PV, PMT, and FV.
2. If you receive $99 each quarter for 17 years and the discount rate is 0.05, what is the future value? (show the process and can use financial calculator)
Using either the Present Value formaula or the Future Value formula, how do I solve the following problem? Show all work! PV(CF) = CF / (1+r)n FV(CF) = CF * (1+r)n Mr. Johnson wants to buy an annuity due that will provide him with income of $50,000 per year for six years. The going interest rate is 6.25%. How much would it cost him to buy the annuity today? (Draw a timeline and show your work.)
You will receive $5,000 one year from now, 6000 three years from now, and 7000 five years from now in real terms. Each payment will be received at the end of the period with the first payment occurring one year from today. The relevant nominal discount rate is 9.625 percent and the inflation rate is 2.3 percent. What are your winnings worth today in real dollars? Pls do using Excel
Using a present value table (Table 6-4 and Table 6-5), calculate the present value for the following: Note: Use the appropriate value(s) from the tables provided and final answers to the nearest whole dollar. Required: a. A car down payment of $10,000 that will be required in two years, assuming an interest rate of 10%. b. A lottery prize of $22.0 million to be paid at the rate of $1,100,000 per year for 20 years, assuming an interest rate of 10%. c. The same annual amount as in part b, but assuming an interest rate of 14%. d. A financing lease obligation that calls for the payment of $34,000 per year for 10 years, assuming a discount rate of 8%. a. Present value b. Present value c. Present value d. Present value
1. If you receive $29 each quarter for 19 years and the discount rate is 0.05, what is the present value? (show the process and can use financial calculator)
A3ai Use the present value and future value formulas to solve the following problems. Confirm your answers with your financial calculator. Show both methods of calculation in your answers. When performing your calculations, keep as many decimal places as you can for intermediate answers, but round your final answers to two decimal places. (10 marks total) If you invest $1000 today at 3% annual interest rate, how much money would you have in one year’s time?
A3aii Use the present value and future value formulas to solve the following problems. Confirm your answers with your financial calculator. Show both methods of calculation in your answers. When performing your calculations, keep as many decimal places as you can for intermediate answers, but round your final answers to two decimal places. (10 marks total) If you invest $1000 today at 3% annual interest rate, how much money would you have in 10 years’ time?
What is the present worth of a future payment of $19,000 in year 7 if the interest rate is 10% per year using (a) the tabulated factor values in your book, (b) TVM functions on a financial calculator, and (c) built-in functions on a spreadsheet?
You want to buy a piece of land and the owner would sell it to you for $20,000 cash. Alternatively, he would let you pay for it with five annual installments of $5,000 each, the first one due right now. What is the implied interest rate here?
For each of the following situations, identify (1) the case as either (a) a present or a future value and (b) asingle amount or an annuity, (2) the table you would use in your computations (but do not solve the problem),and (3) the interest rate and time periods you would use. You need to accumulate $10,000 for a trip you wish to take in four years. You are able to earn 8% compounded semiannually on your savings. You plan to make only one deposit and let the money accumulate for four years. How would you determine the amount of the one-time deposit?

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