Lottery. Your dreams of becoming rich have just come true. You have won the State of Tranquility's Lottery. The State offers you two payment plans for the $3,000,000 advertised jackpot. You can take annual payments of $120,000 at the end of the year for the next 25 years or $1,280,973 today. a. If your investment rate over the next 25 years is 9%, which payoff will you choose? b. If your investment rate over the next 25 years is 7%, which payoff will you choose? c. At what investment rate will the annuity stream of $120,000 be the same as the lump-sum payment of $1,280,973? a. If your investment rate over the next 25 years is 9%, what is the present value of the $120,000 annual payments today? $nothing (Round to the nearest dollar.)
Lottery. Your dreams of becoming rich have just come true. You have won the State of Tranquility's Lottery. The State offers you two payment plans for the $3,000,000 advertised jackpot. You can take annual payments of $120,000 at the end of the year for the next 25 years or $1,280,973 today. a. If your investment rate over the next 25 years is 9%, which payoff will you choose? b. If your investment rate over the next 25 years is 7%, which payoff will you choose? c. At what investment rate will the annuity stream of $120,000 be the same as the lump-sum payment of $1,280,973? a. If your investment rate over the next 25 years is 9%, what is the present value of the $120,000 annual payments today? $nothing (Round to the nearest dollar.)
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
Related questions
Question
Lottery.
Your dreams of becoming rich have just come true. You have won the State of Tranquility's Lottery. The State offers you two payment plans for the
$3,000,000
advertised jackpot. You can take annual payments of
$120,000
at the end of the year for the next
25
years or
$1,280,973
today.a. If your investment rate over the next
25
years is
9%,
which payoff will you choose?b. If your investment rate over the next
25
years is
7%,
which payoff will you choose?c. At what investment rate will the annuity stream of
$120,000
be the same as the lump-sum payment of
$1,280,973?
a. If your investment rate over the next
present value of the
25
years is
9%,
what is the $120,000
annual payments today?$nothing
(Round to the nearest dollar.)Expert Solution
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