Steven won a lottery that will pay $630000 at the end of each of the next twenty years. Sheridan Finance has offered to purchase the payment stream for $7849800. What interest rate (to the nearest percent) was used to determine the amount of the payment? O 7% O 5% O 6% O 8%
Steven won a lottery that will pay $630000 at the end of each of the next twenty years. Sheridan Finance has offered to purchase the payment stream for $7849800. What interest rate (to the nearest percent) was used to determine the amount of the payment? O 7% O 5% O 6% O 8%
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:Steven won a lottery that will pay $630000 at the end of each of the next twenty years. Sheridan Finance has offered to purchase the
payment stream for $7849800. What interest rate (to the nearest percent) was used to determine the amount of the payment?
O 7%
O 5%
O 6%
O 8%
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Step 1: Introduction
Present value is an estimate of the present value of future cash values that may be received at a future date, discounted by an assumed discount rate. Investors evaluate their projects on the basis of their present value.
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