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You won a 1.5 million lottery. You are given the following options to get paid on your winnings. If you can earn 12% rate with monthly compounding on your investments, which option would you choose? Find each option's present value (PV) and then choose which option is the best one.    (For your answer, round to the nearest integer.) OPTION A:  receive $20,000 per month at the end of each month until 60th month, & $30,000 per month from 61st month until 70th month. PV of this option would be   Question Blank 1 of 6 Answer OPTION B: receive 60% of your winning today as a lump sum payment (40% is used toward taxes) PV of this option would be   Question Blank 2 of 6 Answer OPTION C: receive 25,000 per month at the end of each month for the next 5 years PV of this option would be   Question Blank 3 of 6 Answer OPTION D: receive 24,000 per month at the beginning of each month for the next 5 years PV of this option would be   Question Blank 4 of 6 Answer OPTION E: receive 90% of your winning 2 years from now as a lump sum payment  PV of this option would be   Question Blank 5 of 6 Answer

You won a 1.5 million lottery. You are given the following options to get paid on your winnings. If you can earn 12% rate with monthly compounding on your investments, which option would you choose? Find each option's present value (PV) and then choose which option is the best one.    (For your answer, round to the nearest integer.) OPTION A:  receive $20,000 per month at the end of each month until 60th month, & $30,000 per month from 61st month until 70th month. PV of this option would be   Question Blank 1 of 6 Answer OPTION B: receive 60% of your winning today as a lump sum payment (40% is used toward taxes) PV of this option would be   Question Blank 2 of 6 Answer OPTION C: receive 25,000 per month at the end of each month for the next 5 years PV of this option would be   Question Blank 3 of 6 Answer OPTION D: receive 24,000 per month at the beginning of each month for the next 5 years PV of this option would be   Question Blank 4 of 6 Answer OPTION E: receive 90% of your winning 2 years from now as a lump sum payment  PV of this option would be   Question Blank 5 of 6 Answer

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
Problem 1PS
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You won a 1.5 million lottery. You are given the following options to get paid on your winnings. If you can earn 12% rate with monthly compounding on your investments, which option would you choose? Find each option's present value (PV) and then choose which option is the best one. 

 

(For your answer, round to the nearest integer.)

  • OPTION A:  receive $20,000 per month at the end of each month until 60th month, & $30,000 per month from 61st month until 70th month.
    • PV of this option would be  
      Question Blank 1 of 6
      Answer
  • OPTION B: receive 60% of your winning today as a lump sum payment (40% is used toward taxes)
    • PV of this option would be  
      Question Blank 2 of 6
      Answer
  • OPTION C: receive 25,000 per month at the end of each month for the next 5 years
    • PV of this option would be  
      Question Blank 3 of 6
      Answer
  • OPTION D: receive 24,000 per month at the beginning of each month for the next 5 years
    • PV of this option would be  
      Question Blank 4 of 6
      Answer
  • OPTION E: receive 90% of your winning 2 years from now as a lump sum payment 
    • PV of this option would be  
      Question Blank 5 of 6
      Answer

 

 

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