Jacques just won the lottery and must choose between three award options: 1. A lump sum of $15,000,000 received today 2. 15 end-of-year payments of $1,875,000 3. 40 end-of-year payments of $1,350,000 For each option in the table, indicate which values to enter for each variable in your financial calculator. Option 1 Option 2 Option 3 Lump Sum Payment 15 Payments 40 Payments No. of Periods Annual payment Future Value Present Value $15,000,000 FV=0 7 FV-0 Assume the interest rate is 8.00%, entered as 8 on your financial calculator Note: Take the absolute value of the present value when answering this question. Using the table you just filled out, along with a financial calculator, yields a present value for option 2 of approximately present value for option 3 of approximately if he seeks to maximize present value. and a (when the interest rate is 8.00%). Based on this, Jacques should choose option Now assume the interest rate is 9.00%, entered as 9 on your financial calculator.
Jacques just won the lottery and must choose between three award options: 1. A lump sum of $15,000,000 received today 2. 15 end-of-year payments of $1,875,000 3. 40 end-of-year payments of $1,350,000 For each option in the table, indicate which values to enter for each variable in your financial calculator. Option 1 Option 2 Option 3 Lump Sum Payment 15 Payments 40 Payments No. of Periods Annual payment Future Value Present Value $15,000,000 FV=0 7 FV-0 Assume the interest rate is 8.00%, entered as 8 on your financial calculator Note: Take the absolute value of the present value when answering this question. Using the table you just filled out, along with a financial calculator, yields a present value for option 2 of approximately present value for option 3 of approximately if he seeks to maximize present value. and a (when the interest rate is 8.00%). Based on this, Jacques should choose option Now assume the interest rate is 9.00%, entered as 9 on your financial calculator.
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:Jacques just won the lottery and must choose between three award options:
1. A lump sum of $15,000,000 received today
2. 15 end-of-year payments of $1,875,000
3, 40 end-of-year payments of $1,350,000
For each option in the table, indicate which values to enter for each variable in your financial calculator.
Option 1
Option 2
Option 3
40 Payments
Lump Sum Payment
15 Payments
No. of Periods
Annual payment
Future Value
Present Value
FV=0
7
Assume the interest rate is 8.00%, entered as 8 on your financial calculator.
Note: Take the absolute value of the present value when answering this question.
Using the table you just filled out, along with a financial calculator, yields a present value for option 2 of approximately
present value for option 3 of approximately
if he seeks to maximize present value.
$15,000,000
FV-0
7
and a
(when the interest rate is 8.00%). Based on this, Jacques should choose option
Now assume the interest rate is 9.00%, entered as 9 on your financial calculator.
Transcribed Image Text:Now assume the interest rate is 9.00%, entered as 9 on your financial calculator.
Note: Take the absolute value of the present value when answering this question.
Using the table you just filled out, along with your financial alculator, yields a present value for option 2 of approximately
a present value for option 3 of approximately
if he seeks to maximize present value.
Assume the interest rate is 10.00 % , entered as 10 on your financial calculator.
and
(when the interest rate is 9.00%). Based on this, Jacques should choose option
Note: Take the absolute value of the present value when answering this question.
Using the table you just filled out, along with your financial calculator, yields a present value for option 2 of approximately
a present value for option 3 of approximately
option
if he seeks to maximize present value.
As the interest rate increases, option 1 becomes
attractive.
(when the interest rate is 10.00 %). Based on this, Jacques should choose
and
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