Suppose a state lottery prize is to be paid in 25 payments of $360,000 each at the end of each of the next 25 years. (a) What is the total of all payments received (the advertised value of the lottery prize)? (b) Instead of receiving annual payments, the winner opts to receive a single payment today equal to the present value of the prize. Find the amount of today's payment if: (Round your answer to the nearest cent.) interest is 9% $ interest is 13% $
Suppose a state lottery prize is to be paid in 25 payments of $360,000 each at the end of each of the next 25 years. (a) What is the total of all payments received (the advertised value of the lottery prize)? (b) Instead of receiving annual payments, the winner opts to receive a single payment today equal to the present value of the prize. Find the amount of today's payment if: (Round your answer to the nearest cent.) interest is 9% $ interest is 13% $
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:Suppose a state lottery prize is to be paid in 25 payments of $360,000 each at the end of each of the next 25 years.
(a) What is the total of all payments received (the advertised value of the lottery prize)?
(b) Instead of receiving annual payments, the winner opts to receive a single payment today equal to the present value of the prize.
Find the amount of today's payment if: (Round your answer to the nearest cent.)
interest is 9% $
interest is 13% $
Transcribed Image Text:Rank each interest rate and compounding scheme in order from highest yield to lowest yield.
3% compounded quarterly, 3% compounded monthly, 3% compounded annually
(highest yield)
---Select---
---Select---
---Select---
+
+
(lowest yield)
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