Mc Gregor has just won a prize in a game show with the winning prize worth RM30 million. However, he was given two options to receive those prizes: Ja. Option 1: Receive RM1 million for next 30 years beginning now. b. Option 2: Receive RM1.5 million each year from year 1 until 10" year, RM500,000 from 11 to 20 years and RM1 million from 21 until 30 years. Required : (0) Suggest which of the two is the better option and assuming the interest rate at 7 percent for the next 30 years. (Please show your work). (ii) If she is offered third options, which is to receive RM12 million one lumD Sum amount now. What is the rate of interest, that makes Mc Gregor indifferent to choose either option one or three (Show the Janswer to two decimal points)?

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
icon
Related questions
Question

Mc Gregor has just won a prize in a game show with the winning prize worth RM30 million. However, he was given two options to receive those prizes: Ja. Option 1: Receive RM1 million for next 30 years beginning now. b. Option 2: Receive RM1.5 million each year from year 1 until 10" year, RM500,000 from 11 to 20 years and RM1 million from 21 until 30 years. Required : (0) Suggest which of the two is the better option and assuming the interest rate at 7 percent for the next 30 years. (Please show your work). (ii) If she is offered third options, which is to receive RM12 million one lumD Sum amount now. What is the rate of interest, that makes Mc Gregor indifferent to choose either option one or three (Show the Janswer to two decimal points)?

Expert Solution
steps

Step by step

Solved in 3 steps with 6 images

Blurred answer
Knowledge Booster
Social Security Benefits
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education