Consider a nominal prize of one million d 25% rate and invests the rest Assume the funds invested eam 6% per year, with both Federal taxes paid from that income and the remainder reinvested. The Assignment 1. Determine the total amount of money the winner will have at the end of twenty years. This will be one year after the last payment 2. Determine the amount the winner would have had at the end of twenty years if he or she had been given one milion dollars all at onc Investment 3. Determine the amount for a lump sum payment that would leave the winner with the same amount as the annuity after twenty years 1. Discuss assumptions that were made to simplify this assignment along with important factors that have been omitted.
Consider a nominal prize of one million d 25% rate and invests the rest Assume the funds invested eam 6% per year, with both Federal taxes paid from that income and the remainder reinvested. The Assignment 1. Determine the total amount of money the winner will have at the end of twenty years. This will be one year after the last payment 2. Determine the amount the winner would have had at the end of twenty years if he or she had been given one milion dollars all at onc Investment 3. Determine the amount for a lump sum payment that would leave the winner with the same amount as the annuity after twenty years 1. Discuss assumptions that were made to simplify this assignment along with important factors that have been omitted.
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:Project for Ma
Consider a nominal prize of one million dollars, to be paid in twenty annual payments of $50,000. Assume when each payment is made, the recipient immediately pays Federal income tax at a
25% rate and invests the rest.
Assume the funds invested eam 6% per year, with both Federal taxes paid from that income and the remainder reinvested.
The Assignment
1. Determine the total amount of money the winner will have at the end of twenty years. This will be one year after the last payment
2. Determine the amount the winner would have had at the end of twenty years if he or she had been given one million dollars all at once under the same conditions regarding taxes and
Investment.
3. Determine the amount for a lump sum payment that would leave the winner with the same amount as the annuity after twenty years.
1. Discuss assumptions that were made to simplify this assignment along with important factors that have been omitted.
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