You have just won the state lottery and have two choices for collecting your winnings. You can collect $111,000 today or receive $21,900 at the end of each year for the next seven years. A financial analyst has told you that you can earn 9 percent on your investments. Required: 1. Calculate the present value of both the options (FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. 2. Which alternative should you select?

You have just won the state lottery and have two choices for collecting your winnings. You can collect $111,000 today or receive $21,900 at the end of each year for the next seven years. A financial analyst has told you that you can earn 9 percent on your investments. Required: 1. Calculate the present value of both the options (FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. 2. Which alternative should you select?

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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You have just won the state lottery and have two choices for collecting your winnings. You can collect $108,000 today or receive $21,300 at the end of each year for the next seven years. A financial analyst has told you that you can earn 9% on your investments. Required: 1. Calculate the present value of both the options (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your answers to nearest whole dollar.) Present Value Option 1 Option 2 108,000 2. Which alternative should you select? O Option 1 O Option 2 %24
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I
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