Congratulations, you've just won the $3,800,000 state lottery! The lottery commission offers you the choice of $173,000 per year for 25 years or a one-time, lump-sum payment of $1,882,000 if your intent of annual cash flow or lump-sum) for retirement in an account that earns 15.00 % annually, which payment option should you choose? O Take the lump-sum payment now because the present value of the annuity is less than the lump-sum payment. O Take the lump-sum payment now because the present value of the annuity is greater than the lump-sum payment. O You are indifferent between the lump-sum or annuity payment because the present value of the annuity is less than the lump-sum payment. O Choose the annual payment because the present value of the annuity is less than the lump-sum payment. O Choose the annual payment because the present value of the annuity is greater than the lump-sum payment.

Congratulations, you've just won the $3,800,000 state lottery! The lottery commission offers you the choice of $173,000 per year for 25 years or a one-time, lump-sum payment of $1,882,000 if your intent of annual cash flow or lump-sum) for retirement in an account that earns 15.00 % annually, which payment option should you choose? O Take the lump-sum payment now because the present value of the annuity is less than the lump-sum payment. O Take the lump-sum payment now because the present value of the annuity is greater than the lump-sum payment. O You are indifferent between the lump-sum or annuity payment because the present value of the annuity is less than the lump-sum payment. O Choose the annual payment because the present value of the annuity is less than the lump-sum payment. O Choose the annual payment because the present value of the annuity is greater than the lump-sum payment.

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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As a result of winning the Gates Energy Innovation Award, you are awarded a growing perpetuity. The first payment will occur in a year and will be for $25,000. You will continue receiving monetary awards annually with each award increasing by 5 percent over the previous award, and these monetary awards will continue forever. If the appropriate interest rate is 13 percent, what is the present value of this award? Question content area bottom Part 1 The present value of the award is $
As a result of winning the Gates Energy Innovation Award, you are awarded a growing perpetuity. The first payment will occur in a year and will be for $ 30,000. You will continue receiving monetary awards annually with each award increasing by 7 percent over the previous award, and these monetary awards will continue forever. If the appropriate interest rate is 14 percent, what is the present value of this award? Question content area bottom Part 1 The present value of the award is $ enter your response here . (Round to the nearest cent.)
.You want to start a scholarship fund at your alma mater with giving one $10,000 scholarship annually beginning one year from now. And you have at most $150,000 to start the fund. You also want the scholarship to be given out indefinitely. Assuming an annual interest rate of 8% (compounded continuously , do you have enough money for the scholarship fund? 15%4 (Hint: 1. Derive the formula of the present value of a perpetuity .2. Find the present value.)
You estimate you'll need $100,000 per year for 25 years starting on your 65th birthday to live on during your retirement. Today is your 50th birthday and you want to make equal deposits into an account paying 9% interest per year, the first deposit today and the last deposit on your 64th birthday. How much must each deposit be? Group of answer choices $49, 380 $33, 455 $66, 909 $ 85, 840
You just won a special lottery which will entitle you to an annual payment $45000 for 10 years, but the first payment won't start until 5 years later (i.e. 1st payment at the end of the 5th year). If you plan to immediately deposit every payment into an annuity product that gives you 5.62% APR with annual compounding, how much is your account balance at the end of the lottery payment plan (i.e. when you receive the last payment)?
You win the lottery and the State is going to pay you some payments every year, and a final payment of 1,000,000 dollars after 30 years. Assuming a discount rate of 10 percent, in absolute value terms what is the difference in the present value of the State paying the million today or at the end of the 30 years? (a) 0 (b) 942691.55 (c) 1306897.64 (d) 234566.22
You like to buy lottery tickets every week. The lottery pays an insurancecompany that pays the winner an annuity. If you win a $60,000,000 lotteryand elect to take an annuity, you get $3,000,000 per year at the beginningof each year for the next 20 years.a. How much must the state pay the insurance company if money can earn3 percent?b. How much interest is earned on this lump-sum payment over the 20 years?c. If you take the cash rather than the annuity, the state pays you $30,000,000in one lump sum today. You must pay 40 percent of this in taxes. If you arecurrently working and invest this money at 6 percent, how much moneywill you have in a mutual fund at the end of 20 years?d. Are you better off with the annuity, or should you take the cash? Explain.
Suppose you just won the state lottery, and you have a choice between receiving $2,625,000 today or a 20-year annuity of $270,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes. a. 7.83% b. 10.29% c. 8.13% d. 12.04% e. 9.38%
A winner of the multi - state lotto won a one time payout and decided to invest part of it into an annuity. If the winner invests $6,700,000.00 into a 30 year annuity that pays 3.5%, compounded monthly and makes each month payments. What is the amount of each month payments? The payment would be $. (Round to 2 decimal places.)

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