“Want to win half a million dollars? Here’s how. . . . One winner, chosen at random from all entries, will win a $500,000 annuity.” That was the statement announcing a contest on the World Wide Web. The contest rules described the “half a million-dollar prize” in greater detail: “20 annual payments of $25,000 each, which will result in a total payment of $500,000. The first payment will be made January 1; subsequent payments will be made each January thereafter.” Using a compound annual interest rate of 8 percent, what is the present value of this “half a million-dollar prize” as of the first installment on January 1?
“Want to win half a million dollars? Here’s how. . . . One winner, chosen at random from all entries, will win a $500,000 annuity.” That was the statement announcing a contest on the World Wide Web. The contest rules described the “half a million-dollar prize” in greater detail: “20 annual payments of $25,000 each, which will result in a total payment of $500,000. The first payment will be made January 1; subsequent payments will be made each January thereafter.” Using a compound annual interest rate of 8 percent, what is the present value of this “half a million-dollar prize” as of the first installment on January 1?
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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“Want to win half a million dollars? Here’s how. . . . One winner, chosen at random from all
entries, will win a $500,000
Wide Web. The contest rules described the “half a million-dollar prize” in greater detail: “20
annual payments of $25,000 each, which will result in a total payment of $500,000. The first
payment will be made January 1; subsequent payments will be made each January thereafter.”
Using a
million-dollar prize” as of the first installment on January 1?
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