The top prize for the state lottery is $114,100,000. You have decided it is time for you to take a chance and purchase a ticket. Before you purchase the ticket, you must decide whether to choose the cash option or the annual payment option. If you choose the annual payment option and win, you will receive $114,100,000 in 16 equal payments of $7,131,250-one payment today and one payment at the end of each of the next 15 years. If you choose the cash payment, you will receive a one-time lump sum payment of $68,171,032.39. If you can invest the proceeds and earn 9 percent, which you would choose along with the present value of the annuity? (Round factor values to 4 decimal places, e.g. 1.5213 and final answer to 2 decimal places, e.g. 15.25.) Lump sum payment

The top prize for the state lottery is $114,100,000. You have decided it is time for you to take a chance and purchase a ticket. Before you purchase the ticket, you must decide whether to choose the cash option or the annual payment option. If you choose the annual payment option and win, you will receive $114,100,000 in 16 equal payments of $7,131,250-one payment today and one payment at the end of each of the next 15 years. If you choose the cash payment, you will receive a one-time lump sum payment of $68,171,032.39. If you can invest the proceeds and earn 9 percent, which you would choose along with the present value of the annuity? (Round factor values to 4 decimal places, e.g. 1.5213 and final answer to 2 decimal places, e.g. 15.25.) Lump sum payment

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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Suppose you played a number picking game from the Lottery. Your lucky numbers are your five most recent test scores from this and other courses. As luck would have it, those numbers won you the jackpot. After having your picture taken with a giant fake cardboard check, the Lottery offers you an annuity consisting of 20 payments of $150,000, with the first payment received immediately after your photo session and 19 additional payments each year thereafter. Assuming a discount rate of 5%, what is the total value of your jackpot in present value terms? Write the answer below without dollar signs or commas, and express the answer to the nearest cent.
Bob's Lottery Incorporated has decided to offer winners a choice of $100,000 in 10 years or some amount currently. Assume that Bob's Lottery Incorporated earns a 10 percent after-tax rate of return. What amount should Bob's offer lottery winners currently in order to be indifferent between the two choices? (See Exhibit 3.1) NOTE: Round your answer to the nearest whole dollar amount.
Nn.120. Subject ;- Account
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