Joey is one of several winners who shared a lottery ticket. There are three plans offered to receive the after-tax proceeds.Plan 1: $100,000 nowPlan 2: $15,000 per year for 8 years beginning 1 year from now. Total is$120,000.Plan 3: $45,000 now, another $45,000 four years from now, and a final$45,000 eight years from now. Total is $135,000.Joey, a quite conservative person financially, plans to invest all of the proceeds as he receives them. He expects to make a real return of 6% per year. Use the 8-year time frame and an average inflation of 4% per year to determine which plan provides the best deal.
Joey is one of several winners who shared a lottery ticket. There are three plans offered to receive the after-tax proceeds.Plan 1: $100,000 nowPlan 2: $15,000 per year for 8 years beginning 1 year from now. Total is$120,000.Plan 3: $45,000 now, another $45,000 four years from now, and a final$45,000 eight years from now. Total is $135,000.Joey, a quite conservative person financially, plans to invest all of the proceeds as he receives them. He expects to make a real return of 6% per year. Use the 8-year time frame and an average inflation of 4% per year to determine which plan provides the best deal.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Joey is one of several winners who shared a lottery ticket. There are three plans offered to receive the after-tax proceeds.
Plan 1: $100,000 now
Plan 2: $15,000 per year for 8 years beginning 1 year from now. Total is
$120,000.
Plan 3: $45,000 now, another $45,000 four years from now, and a final
$45,000 eight years from now. Total is $135,000.
Joey, a quite conservative person financially, plans to invest all of the proceeds as he receives them. He expects to make a real return of 6% per year. Use the 8-year time frame and an average inflation of 4% per year to determine which plan provides the best deal.
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