Travis just won a lottery which gives him a choice between the following two paymentoptions:a. He will receive a one-time payment of $100,000 right now, ORb. He will receive $10,000 every year for the next 20 years.Which option Travis should go for? Suppose the interest rate is 5%. please show work.

Travis just won a lottery which gives him a choice between the following two paymentoptions:a. He will receive a one-time payment of $100,000 right now, ORb. He will receive $10,000 every year for the next 20 years.Which option Travis should go for? Suppose the interest rate is 5%. please show work.

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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Similar questions

Consider the following situation, which requires comparison of options.Cousin Thaddeus offers to pay you $3,000 every year for the next 10 years if you give him$20,000 now. Let us suppose that your MARR is 10%, and that a local bank is offering this rate.How can you determine whether Cousin Thaddeus’ offer is better than putting the money in the bank?
Hashim wants to invest an amount of OMR. 9800 every year to buy a house at the end of 10 years. For this purpose, he wants to invest some money in a saving bank but does not know the exact amount of money he will get after 10 years a) What amount will he receive assuming an interest rate of 4.005%? b) What amount will he receive assuming an interest rate of 5.50%? c) Suggest the option which will be enough to meet his house which is estimated to be OMR. 100000?
You have a chance to buy an annuity that pays $50,000 at the beginning of each year for 15 years. You could earn 10.0% 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. However to receive credit you must provide the inputs used (N, PMT, FV, I/Y, PV) to solve. If you utilize a template, you can copy and paste the section used in the submission. $418,334.37 $750,000.00 $380,303.98
A man plans to take a vacation in 5 years. He wants to buy a certificate of deposit for $1300 that he will cash in for the trip. What is the minimum annual interest rate he must obtain on the certificate if he needs at least $1500 for the trip? Assume that the interest on the loan is computed using simple interest. The rate he must obtain is
You just won the Florida lottery. To receive your winnings, you must select ONE of the twofollowing choices:1. You can receive $1,000,000 a year at the end of each of the next 30 years.2. You can receive a one-time payment of $15,000,000 today.Assume that the current interest rate is 6%. Which option is most valuable?
Angel would like to start investing his money. He has $10,000 that he hopes to use as a down payment for a house in ten years. He has two investment options: Option A: 9% investment that compounds yearly Option B: 11% simple interest investment Which one should Qngel choose?
David wants to invest $1,500,000 so that he will have an accumulated amount of at least $2,500,000 after some years. He has two choices of investment A and investment B. Investment A offers him an semi-annual simple interest rate of 10% while investment B offers him an effective annual interest rate of 8% convertible annually. Which investment will help him reach his goal faster? Approximate the time that each investment will reach his goal.
John has an investment opportunity that promises to pay him $16,000 in four years. Suppose the opportunity requires John to invest $13,200 today. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) What is the interest rate John would earn on this investment? (Round your interest rate to the nearest whole percentage.) Solve for i Present Value: n = i = Future Value:
You want to buy a piece of land and the owner would sell it to you for $20,000 cash. Alternatively, he would let you pay for it with five annual installments of $5,000 each, the first one due right now. What is the implied interest rate here?
A man plans to take a vacation in 4 years. He wants to buy a certificate of deposit for $1200 that he will cash in for the trip. What is the minimum annual interest rate he must obtain on the certificate if he needs at least $1700 for the trip? Assume that the interest on the loan is computed using simple interest The rate he must obtain is ___%
You are planning to purchase a house for your son on his 21st birthday. He is now 11 years old. The house you will purchase for him will cost ¢300,000,000. You are thinking of two options. a.To deposit a lump sum which will grow to the amount required. b.To deposit each year a fixed amount to accumulate to the required amount. Required: If the interest rate is 15%, how much do you need for each option?
investor plans to pay his son’s university tuition fees for 4 years starting 18 years from now. The current annual cost of university is £9,200, and they expect this cost to rise at an annual rate of 2%. In his planning, he assumes that the appropriate discount rate is 3% per annual. How much must he saves each year, starting next year, if he plans to make 17 identical payments? Show all the calculations step-by-step. Formulas and diagram(s) are essential.

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