Suppose you win the lottery and you're thinking about whether to take the lump sum or be paid the annuity over time, so you need to first figure out the present value of theannuity. What is the value of a growing annuity due (i.e., you get some money immediately at t=0) that pays you $8 million now, and you then receive 29 more payments (i.e., 30payments in total) where each payment is 3% larger than the last. Assume the discount rate is 7%. Answer in MILLIONS of dollars without the dollar sign and two decimal place(e.g., "28.23" is $28.23 million).Type your answer...

First payment: $8 million (immediate payment at t=0)Discount rate: 7%Number of payments: 30Growth…

Answered: Suppose you win the lottery and you're…

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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Mick Mitchell wishes to have $120,000 in seven years. If he can earn annual interest of 12%, how much must he invest today? Click the icon to view Present Value of Ordinary Annuity of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of S1 table.) (Click the icon to view Present Value of S1 table.) (Click the icon to view Future Value of S1 table.) OA. $265,320 В. $1,210 OC $54,240 OD. S111,960
Suppose you just won the state lottery, and you have a choice between receiving $2,515,000 today or a 20-year annuity of $220,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes. O a. 6.88% O b. 12.96% O c. 6.04% O d. 5.69% O e. 8.75%
You have decided to start saving money for your future. What is the future value of a 17-year annuity of $2.500 per year, assuming that you make your first payment today and the interest rate is 7 percent? (Enter your answer as a positive number rounded to 2 decimal places.) Answer is complete but not entirely correct. Future value 102.497.50 L
An annuity saleman showed up at your door and gave you the following offer: His company is willing to give you $10 every week for one year if only you gave him $480 now. What is the annual rate of return that you would earn by accepting this offer?
You want to buy an ordinary annuity that pays you $4000 annually for the next 20 years. The annual interest rate is expected to be 8% over this 20-year period. The price you would be willing to pay for the annuity is: $32000. $39272. $40000. $80000.
Suppose that Raphael is 35 years old and has no retirement savings. He wants to begin saving for retirement, with the first payment coming one year from now. He can save $20,000 per year and will invest that amount in the stock market, where it is expected to yield an average annual return of 10.00% return. Assume that this rate will be constant for the rest of his's life. In short, this scenario fits all the criteria of an ordinary annuity. Raphael would like to calculate how much money he will have at age 60. Use the following table to indicate which values you should enter on your financial calculator. For example, if you are using the value of 1 for N, use the selection list above N in the table to select that value. Input Keystroke Output N I/Y Input Keystroke Output 0 PV N Using a financial calculator yields a future value of this ordinary annuity to be approximately PMT Raphael would now like to calculate how much money he will have at age 65. I/Y FV 0 PV ? Use the following…
If you are saving the same amount each month in order to buy a new BMW car when the new models are released the future value of an ordinary annuity will help you determine the savings needed. True / False
You have a chance to buy an annuity that pays $25,000 at the beginning of each year for 10 years. You could earn 8.5% on your money in other investments with equal risk. What is the most you should pay for the annuity? You are not required to show calculations but you must list the inputs used such as N, PV, FV, etc. O $346,484.41 O $177,976.57 O $164,033.70
Suppose you just won the state lottery, and you have a choice between receiving $2,625,000 today or a 20-year annuity of $270,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes. a. 7.83% b. 10.29% c. 8.13% d. 12.04% e. 9.38%
Suppose you want to save $1,000,000 for a retirement fund in 35 years. You anticipate making regular, end-of-month deposits in an annuity that pays 9% compounded monthly. How much should you deposit each month? Use this formula: How much of the $1,000,000 retirement fund comes from deposits and how much comes from interest?

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