Michael won the Powerball jackpot of 55 million dollars. He has two options to collect the cash: (a) 30-year annuities (first payment one year from today) which future value equates the jackpot amount given that the prevailing interest rate is 4% per year; (b) a single payment now, corresponding to the present value of those 30-year annuities. Michael has big plans, hence he prefers option (b). Assuming that there are no taxes, how much money will he be able to collect now? (note: round your answer to the nearest cent and do not include spaces, currency signs, or commas)
Michael won the Powerball jackpot of 55 million dollars. He has two options to collect the cash: (a) 30-year annuities (first payment one year from today) which future value equates the jackpot amount given that the prevailing interest rate is 4% per year; (b) a single payment now, corresponding to the present value of those 30-year annuities. Michael has big plans, hence he prefers option (b). Assuming that there are no taxes, how much money will he be able to collect now? (note: round your answer to the nearest cent and do not include spaces, currency signs, or commas)
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:Michael won the Powerball jackpot of 55 million dollars. He has two
options to collect the cash: (a) 30-year annuities (first payment one year
from today) which future value equates the jackpot amount given that the
prevailing interest rate is 4% per year; (b) a single payment now,
corresponding to the present value of those 30-year annuities. Michael has
big plans, hence he prefers option (b). Assuming that there are no taxes,
how much money will he be able to collect now? (note: round your answer
to the nearest cent and do not include spaces, currency signs, or commas)
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