You won the lottery and have a couple of choices as to how to take the money. Which choice yields a greater present value Present Value of $1 Periods 4 5 6 7 8 Present Value of Annuity of $1 5% 3.546 Periods 5% 0.823 0.784 0.746 0.711 0.677 0.645 456789 4.329 5.076 5.786 6.463 7.108 6% 0.792 0.747 0.705 0.665 0.627 0.592 6% 3.465 4.212 4.917 5.582 6.210 6.802 8% 0.735 0.681 0.630 0.583 0.540 0.500 8% 3.312 3.993 4.623 5.206 5.747 6.247 10% 0.683 0.621 0.564 0.513 0.467 0.424 10% 3.170 3.791 4.355 4.868 5.335 5.759 OA. $6,000 a year at the end of each of the next 6 years using a 6% discount rate OB. $85,000 (lump sum) 7 years from now using a 6 % discount rate OC. $53,500 (lump sum) now using a 6 % discount rate OD. $80,000 (lump sum) 7 years from now using an 8% discount rate
You won the lottery and have a couple of choices as to how to take the money. Which choice yields a greater present value Present Value of $1 Periods 4 5 6 7 8 Present Value of Annuity of $1 5% 3.546 Periods 5% 0.823 0.784 0.746 0.711 0.677 0.645 456789 4.329 5.076 5.786 6.463 7.108 6% 0.792 0.747 0.705 0.665 0.627 0.592 6% 3.465 4.212 4.917 5.582 6.210 6.802 8% 0.735 0.681 0.630 0.583 0.540 0.500 8% 3.312 3.993 4.623 5.206 5.747 6.247 10% 0.683 0.621 0.564 0.513 0.467 0.424 10% 3.170 3.791 4.355 4.868 5.335 5.759 OA. $6,000 a year at the end of each of the next 6 years using a 6% discount rate OB. $85,000 (lump sum) 7 years from now using a 6 % discount rate OC. $53,500 (lump sum) now using a 6 % discount rate OD. $80,000 (lump sum) 7 years from now using an 8% discount rate
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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Transcribed Image Text:You won the lottery and have a couple of choices as to how to take the money. Which choice yields a greater present value?
Present Value of $1
Periods
4
56789
5%
0.823
456789
0.784
0.746
0.711
0.677
0.645
Present Value of Annuity of $1
Periods
5%
3.546
4.329
5.076
5.786
6.463
7.108
6%
0.792
0.747
0.705
0.665
0.627
0.592
6%
3.465
4.212
4.917
5.582
6.210
6.802
8%
0.735
0.681
0.630
0.583
0.540
0.500
8%
3.312
3.993
4.623
5.206
5.747
6.247
10%
0.683
0.621
0.564
0.513
0.467
0.424
10%
3.170
3.791
4.355
4.868
5.335
5.759
OA. $6,000 a year at the end of each of the next 6 years using a 6% discount rate
OB. $85,000 (lump sum) 7 years from now using a 6% discount rate
OC. $53,500 (lump sum) now using a 6 % discount rate
OD. $80,000 (lump sum) 7 years from now using an 8% discount rate
***
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