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? Why? What if the interest rate is 4% (.04)? Explain. (Hint: you can use the formula for a fixed-payment loan here.)

? Why? What if the interest rate is 4% (.04)? Explain. (Hint: you can use the formula for a fixed-payment loan here.)

Essentials Of Investments
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
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c.) You win the lottery. You can either have $850,000 right now, or S1,000,000 paid in 5 annual installments of $200,000 starting next year. If the interest rate is 6% (06), which will you choose? Why? What if the interest rate is 4% (.04)? Explain. (Hint: you can use the formula for pricing a fixed-payment loan here.)
Transcribed Image Text:c.) You win the lottery. You can either have $850,000 right now, or S1,000,000 paid in 5 annual installments of $200,000 starting next year. If the interest rate is 6% (06), which will you choose? Why? What if the interest rate is 4% (.04)? Explain. (Hint: you can use the formula for pricing a fixed-payment loan here.)
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