Robert has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $125,000 cash payment today. The second option is to receive $21,500 at the end of each of the next 19 years and a $20,500 lump sum payment in the 20th year. Robert can invest money at a 7% rate. Click here to view the factor table. (a) Calculate the present value of the two options. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971.) Present value $ Option 1 $ Which option should Robert choose to receive his winnings? Option 2
Robert has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $125,000 cash payment today. The second option is to receive $21,500 at the end of each of the next 19 years and a $20,500 lump sum payment in the 20th year. Robert can invest money at a 7% rate. Click here to view the factor table. (a) Calculate the present value of the two options. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971.) Present value $ Option 1 $ Which option should Robert choose to receive his winnings? Option 2
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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Question
Nn.120.
Subject ;- Account
![E
Robert has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $125,000 cash
payment today. The second option is to receive $21,500 at the end of each of the next 19 years and a $20,500 lump sum payment in
the 20th year. Robert can invest money at a 7% rate.
Click here to view the factor table.
(a) Calculate the present value of the two options. (For calculation purposes, use 4 decimal places as displayed in the factor table provided
and round final answer to 0 decimal place, e.g. 58,971.)
Present value $
Option 1
Which option should Robert choose to receive his winnings?
Present value $
(b) If Robert could invest money at 10%, calculate the present value of the two options. (For calculation purposes, use 4 decimal places as
displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971.)
Option 1
$
Which option should he choose?
$
Option 2
Option 2](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5a79f5fd-2bdd-484b-9c0d-a83d48b55247%2Fb6ecb1e9-f25f-4e6d-8f3c-766f0c6ce9c5%2Fr71xx7n_processed.jpeg&w=3840&q=75)
Transcribed Image Text:E
Robert has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $125,000 cash
payment today. The second option is to receive $21,500 at the end of each of the next 19 years and a $20,500 lump sum payment in
the 20th year. Robert can invest money at a 7% rate.
Click here to view the factor table.
(a) Calculate the present value of the two options. (For calculation purposes, use 4 decimal places as displayed in the factor table provided
and round final answer to 0 decimal place, e.g. 58,971.)
Present value $
Option 1
Which option should Robert choose to receive his winnings?
Present value $
(b) If Robert could invest money at 10%, calculate the present value of the two options. (For calculation purposes, use 4 decimal places as
displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971.)
Option 1
$
Which option should he choose?
$
Option 2
Option 2
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