If Person L invests each payment from the state at 4.4 % , compounded continuously, what is the accumulated future value of the income stream? Round your answer to the nearest $ 10 .

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Answer 1

Question

Chapter 5.2, Problem 37E

a)

To determine

To calculate: If Person L invests each payment from the state at 4.4% , compounded continuously, what is the accumulated future value of the income stream? Round your answer to the nearest $10 .

b)

To determine

To calculate: What is the accumulated present value of the income stream at 4.4% , compounded continuously? This amount represents what the state needs to invest at the start of its lottery payments, assuming the 4.4% interest rate holds.

c)

To determine

To calculate: The risk for Person L is that he doesn't know how long he will live or what the future interest rate will be; it might vary considerably over 20 yr. This is the risk he assumes in accepting payments of $50,000 a year over 20 yr. Person L is familiar with the formulas for accumulated future value and present value because he has studied business calculus. He calculates the accumulated present value of the income stream for interest rates of 3% , 4% , and 5% . What values does he obtain.

d)

To determine

To calculate: Person L thinks "a bird in the hand (present value) is worth two in the bush (future value)" and decides to negotiate with the state for immediate payment of his lottery winnings. He asks the state for $750,000 . They offer $600,000 . Discuss the advantages and disadvantages of each sum. Person L finally accepts $675,000 . Is this a good decision? Why or why not?

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Answer 2

Question

Chapter 5.2, Problem 37E

a)

To determine

To calculate: If Person L invests each payment from the state at 4.4% , compounded continuously, what is the accumulated future value of the income stream? Round your answer to the nearest $10 .

b)

To determine

To calculate: What is the accumulated present value of the income stream at 4.4% , compounded continuously? This amount represents what the state needs to invest at the start of its lottery payments, assuming the 4.4% interest rate holds.

c)

To determine

To calculate: The risk for Person L is that he doesn't know how long he will live or what the future interest rate will be; it might vary considerably over 20 yr. This is the risk he assumes in accepting payments of $50,000 a year over 20 yr. Person L is familiar with the formulas for accumulated future value and present value because he has studied business calculus. He calculates the accumulated present value of the income stream for interest rates of 3% , 4% , and 5% . What values does he obtain.

d)

To determine

To calculate: Person L thinks "a bird in the hand (present value) is worth two in the bush (future value)" and decides to negotiate with the state for immediate payment of his lottery winnings. He asks the state for $750,000 . They offer $600,000 . Discuss the advantages and disadvantages of each sum. Person L finally accepts $675,000 . Is this a good decision? Why or why not?

Expert Solution & Answer

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Answer 3

Question

Chapter 5.2, Problem 37E

a)

To determine

To calculate: If Person L invests each payment from the state at 4.4% , compounded continuously, what is the accumulated future value of the income stream? Round your answer to the nearest $10 .

b)

To determine

To calculate: What is the accumulated present value of the income stream at 4.4% , compounded continuously? This amount represents what the state needs to invest at the start of its lottery payments, assuming the 4.4% interest rate holds.

c)

To determine

To calculate: The risk for Person L is that he doesn't know how long he will live or what the future interest rate will be; it might vary considerably over 20 yr. This is the risk he assumes in accepting payments of $50,000 a year over 20 yr. Person L is familiar with the formulas for accumulated future value and present value because he has studied business calculus. He calculates the accumulated present value of the income stream for interest rates of 3% , 4% , and 5% . What values does he obtain.

d)

To determine

To calculate: Person L thinks "a bird in the hand (present value) is worth two in the bush (future value)" and decides to negotiate with the state for immediate payment of his lottery winnings. He asks the state for $750,000 . They offer $600,000 . Discuss the advantages and disadvantages of each sum. Person L finally accepts $675,000 . Is this a good decision? Why or why not?

Expert Solution & Answer

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Answer 4

Question

Chapter 5.2, Problem 37E

a)

To determine

To calculate: If Person L invests each payment from the state at 4.4% , compounded continuously, what is the accumulated future value of the income stream? Round your answer to the nearest $10 .

b)

To determine

To calculate: What is the accumulated present value of the income stream at 4.4% , compounded continuously? This amount represents what the state needs to invest at the start of its lottery payments, assuming the 4.4% interest rate holds.

c)

To determine

To calculate: The risk for Person L is that he doesn't know how long he will live or what the future interest rate will be; it might vary considerably over 20 yr. This is the risk he assumes in accepting payments of $50,000 a year over 20 yr. Person L is familiar with the formulas for accumulated future value and present value because he has studied business calculus. He calculates the accumulated present value of the income stream for interest rates of 3% , 4% , and 5% . What values does he obtain.

d)

To determine

To calculate: Person L thinks "a bird in the hand (present value) is worth two in the bush (future value)" and decides to negotiate with the state for immediate payment of his lottery winnings. He asks the state for $750,000 . They offer $600,000 . Discuss the advantages and disadvantages of each sum. Person L finally accepts $675,000 . Is this a good decision? Why or why not?

Expert Solution & Answer

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Answer 5

Chapter 5.2, Problem 37E

a)

To determine

To calculate: If Person L invests each payment from the state at 4.4% , compounded continuously, what is the accumulated future value of the income stream? Round your answer to the nearest $10 .

b)

To determine

To calculate: What is the accumulated present value of the income stream at 4.4% , compounded continuously? This amount represents what the state needs to invest at the start of its lottery payments, assuming the 4.4% interest rate holds.

c)

To determine

To calculate: The risk for Person L is that he doesn't know how long he will live or what the future interest rate will be; it might vary considerably over 20 yr. This is the risk he assumes in accepting payments of $50,000 a year over 20 yr. Person L is familiar with the formulas for accumulated future value and present value because he has studied business calculus. He calculates the accumulated present value of the income stream for interest rates of 3% , 4% , and 5% . What values does he obtain.

d)

To determine

To calculate: Person L thinks "a bird in the hand (present value) is worth two in the bush (future value)" and decides to negotiate with the state for immediate payment of his lottery winnings. He asks the state for $750,000 . They offer $600,000 . Discuss the advantages and disadvantages of each sum. Person L finally accepts $675,000 . Is this a good decision? Why or why not?

Answer 6

Chapter 5.2, Problem 37E

a)

To determine

To calculate: If Person L invests each payment from the state at 4.4% , compounded continuously, what is the accumulated future value of the income stream? Round your answer to the nearest $10 .

Answer 7

Chapter 5.2, Problem 37E

a)

To determine

To calculate: If Person L invests each payment from the state at 4.4% , compounded continuously, what is the accumulated future value of the income stream? Round your answer to the nearest $10 .

Answer 8

b)

To determine

To calculate: What is the accumulated present value of the income stream at 4.4% , compounded continuously? This amount represents what the state needs to invest at the start of its lottery payments, assuming the 4.4% interest rate holds.

Answer 9

b)

To determine

To calculate: What is the accumulated present value of the income stream at 4.4% , compounded continuously? This amount represents what the state needs to invest at the start of its lottery payments, assuming the 4.4% interest rate holds.

Answer 10

c)

To determine

To calculate: The risk for Person L is that he doesn't know how long he will live or what the future interest rate will be; it might vary considerably over 20 yr. This is the risk he assumes in accepting payments of $50,000 a year over 20 yr. Person L is familiar with the formulas for accumulated future value and present value because he has studied business calculus. He calculates the accumulated present value of the income stream for interest rates of 3% , 4% , and 5% . What values does he obtain.

Answer 11

c)

To determine

To calculate: The risk for Person L is that he doesn't know how long he will live or what the future interest rate will be; it might vary considerably over 20 yr. This is the risk he assumes in accepting payments of $50,000 a year over 20 yr. Person L is familiar with the formulas for accumulated future value and present value because he has studied business calculus. He calculates the accumulated present value of the income stream for interest rates of 3% , 4% , and 5% . What values does he obtain.

Answer 12

d)

To determine

To calculate: Person L thinks "a bird in the hand (present value) is worth two in the bush (future value)" and decides to negotiate with the state for immediate payment of his lottery winnings. He asks the state for $750,000 . They offer $600,000 . Discuss the advantages and disadvantages of each sum. Person L finally accepts $675,000 . Is this a good decision? Why or why not?

Answer 13

d)

To determine

To calculate: Person L thinks "a bird in the hand (present value) is worth two in the bush (future value)" and decides to negotiate with the state for immediate payment of his lottery winnings. He asks the state for $750,000 . They offer $600,000 . Discuss the advantages and disadvantages of each sum. Person L finally accepts $675,000 . Is this a good decision? Why or why not?

Answer 14

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Answer 15

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Answer 16

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Answer 17

Ch. 5.1 - In Exercises 1-14, is the price, in dollars per...Ch. 5.1 - In Exercises 1-14, is the price, in dollars per...Ch. 5.1 - In Exercises 1-14, D(x) is the price, in dollars...Ch. 5.1 - In Exercises 1-14, is the price, in dollars per...Ch. 5.1 - In Exercises 1-14, D(x) is the price, in dollars...Ch. 5.1 - In Exercises 1-14, D(x) is the price, in dollars...Ch. 5.1 - In Exercises 1-14, D(x) is the price, in dollars...Ch. 5.1 - Prob. 8E Ch. 5.1 - Prob. 9E Ch. 5.1 - Prob. 10E

If Person L invests each payment from the state at 4.4 % , compounded continuously, what is the accumulated future value of the income stream? Round your answer to the nearest $ 10 .

Solution Summary: The author calculates the accumulated future value of the income stream at 4.4%, compounded continuously.

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To calculate: If Person L invests each payment from the state at 4.4% , compounded continuously, what is the accumulated future value of the income stream? Round your answer to the nearest $10 .

To calculate: What is the accumulated present value of the income stream at 4.4% , compounded continuously? This amount represents what the state needs to invest at the start of its lottery payments, assuming the 4.4% interest rate holds.

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Chapter 5 Solutions