You've just won a lottery! First, they will transfer to your bank account $2,520,000 immediately. Second, they will also transfer to you a total of 40 consecutive payments each equal to $1,260,000, exactly six months apart, but that won't start until 1 year from today. The appropriate discount rate for the lottery payments is 10 percent, with daily compounding. (Assume thirty days in each month and twelve months in each year.) You were ready to sign all lottery payment agreements when a mysterious stranger contacted you and offered to give you $20 million right now in exchange for all the lottery payments. What should you do?? Should you accept the stranger's offer or instead ignore it and simply collect the lottery winnings?? The best way to figure this out is to compare the stranger's offer to the current value of all the lottery winnings and see which one is higher. Five minutes later you had your answer! The lottery winnings are worth $ in today's dollars. (Do not round intermediate calculations. Round your final answer to 2 decimal places, e.g., 12.34.) Present value $ 22,724,539.68
You've just won a lottery! First, they will transfer to your bank account $2,520,000 immediately. Second, they will also transfer to you a total of 40 consecutive payments each equal to $1,260,000, exactly six months apart, but that won't start until 1 year from today. The appropriate discount rate for the lottery payments is 10 percent, with daily compounding. (Assume thirty days in each month and twelve months in each year.) You were ready to sign all lottery payment agreements when a mysterious stranger contacted you and offered to give you $20 million right now in exchange for all the lottery payments. What should you do?? Should you accept the stranger's offer or instead ignore it and simply collect the lottery winnings?? The best way to figure this out is to compare the stranger's offer to the current value of all the lottery winnings and see which one is higher. Five minutes later you had your answer! The lottery winnings are worth $ in today's dollars. (Do not round intermediate calculations. Round your final answer to 2 decimal places, e.g., 12.34.) Present value $ 22,724,539.68
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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K4.
Transcribed Image Text:You've just won a lottery! First, they will transfer to your bank account $2,520,000
immediately. Second, they will also transfer to you a total of 40 consecutive payments
each equal to $1,260,000, exactly six months apart, but that won't start until 1 year from
today. The appropriate discount rate for the lottery payments is 10 percent, with daily
compounding. (Assume thirty days in each month and twelve months in each year.)
You were ready to sign all lottery payment agreements when a mysterious stranger
contacted you and offered to give you $20 million right now in exchange for all the
lottery payments. What should you do?? Should you accept the stranger's offer or
instead ignore it and simply collect the lottery winnings?? The best way to figure this out
is to compare the stranger's offer to the current value of all the lottery winnings and see
which one is higher. Five minutes later you had your answer! The lottery winnings are
worth $ in today's dollars. (Do not round intermediate calculations. Round your
final answer to 2 decimal places, e.g., 12.34.)
Present value $
22,724,539.68
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