As a prize, you are offered of one of the following three options: Option 1: $6,000 today, or Option 2: $8,500 in five years, or Option 3: $10,000 in seven years. Assuming you can earn 7% on your money, which option should you choose. (Briefly explain your choice and show all working to justify your answer.)
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A: Given information :
As a prize, you are offered of one of the following three options:
Option 1: $6,000 today, or
Option 2: $8,500 in five years, or
Option 3: $10,000 in seven years.
Assuming you can earn 7% on your money, which option should you choose. (Briefly
explain your choice and show all working to justify your answer.)
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- You have won the lottery, and you must choose between three award options. You can select one of the following options: To receive a lump sum today of $75 million, To receive 10 end-of-year payments of $12 million, to receive 30 end-of-year payments of $8 million. If you expect to earn 9% annually: What is the present value of alternative ii? What is the present value of alternative iii? Which one you must choose?Sally has won the grand prize in a lottery and must choose between the following three options: (hint: find the PV of each option) Receive a lump sum payment of $10,000,000. Receive annual end of the year payments of $2,000,000 for the next 8 years. Receive annual end of the year payments of $1,500,000 for the next 20 years. Which option should Sally choose based on an annual investment rate of 6%?Peter won a lottery and must decide among the following options: a. $260 at the beginning of every month for 5 years starting 3 years from now. b. $13,250 8.5 years from now. Money' is worth 3.4% compounded monthly. By how much the best option exceed the worst one, based on the present value of the offer?
- Sally has won the grand prize in a lottery and must choose between the following three options: (hint: find the PV of each option) a. Receive a lump sum payment of $10,000,000. b. Receive annual end of the year payments of $2,000,000 for the next 8 years. c. Receive annual end of the year payments of $1,500,000 for the next 20 years. Which option should Sally choose based on an annual investment rate of 6%?Jane Bauer has won the lottery and has the following four options for receiving her winnings: Receive $100,000 at the beginning of the current year Receive $108,000 at the end of the year Receive $20,000 at the end of each year for eight years Receive $10,000 at the end of each year for 30 years Jane can invest her winnings at an interest rate of 8% compounded annually at a major bank. Use the appropriate present or future value table: FV of $1, PV of $1, FV of Annuity of $1 and PV of Annuity of $1 Calculate the Present value for each of the above options. Round all answers to the nearest dollar. Present Value Option 1 $fill in the blank 1 Option 2 $fill in the blank 2 Option 3 $fill in the blank 3 Option 4 $fill in the blank 4 Which of the payment options should Jane choose?You are applying for a scholarship currently valued at $6,500. If you are awarded it at the end of next year, how much will it be worth in today's dollars, assuming inflation of 2.5 percent
- The winner of a $10,000,000 prize has the following payment choices. If the interest rate is 10%, which choice is best? Select one: a. $3,000,000 per year for 12 years b. $2,000,000 per year for 50 years c. $10,000,000 now d. $55,000,000 in 10 years e. All of choices are the sameKerry Bales won the state lottery and was given four choices for receiving her winnings. Receive $1,000,000 right now. Receive $1,080,000 in 1 year. Receive $180,000 at the end of each year for eight years. Receive $90,000 at the end of each year for 30 years. Assuming Kerry can earn interest of 8% compounded annually, (a) calculate each option and (b) determine which option Kerry should choose?Use Excel or a financial calculator for computation. Round your answer to nearest dollar. (a) 1. Answer (a) 2. Answer (a) 3. Answer (a) 4. Answer (b) AnswerBuena Suerte won the "Ikiskis mo" contest. As her prize, she is given the following choices: a. to receive an instant cash of P300,000 b. to receive monthly pension of P15,000 for two and a half years c. to receive a quarterly pension of P35,000 for 3 years d. to receive a yearly pension as follows: P100,000 for the first year; P50,000 each year for the next 4 years; P75,000 each year for the last 2 years. Question: Which choices you recommend to Ms. Buena Suerte? Discount rate is 12% per annum. Rank your choices.
- Assume that Aliza has a winning lottery ticket and she are the given the option of accepting the value of P1,000,000 paying interest three years from now or taking the present value of the P1,000,000 now. The sponsor of the prize is using a 6% interest and discount rate. a. If she choose to receive the present value of the prize now, how much will she receive? b. If she choose to receive the value 3 years from now, how much will she receive? c. Which of the options will give her higher amount?Your grandfather has offered you a choice of one of the three following alternatives: $7,500 now; $2,200 a year for nine years; or $31,000 at the end of nine years. Use Appendix B and Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods. a-1. Assuming you could earn 10 percent annually, compute the present value of each alternative: (Do not round intermediate calculations. Round your final answers to 2 decimal places.) b-1. If you could earn 11 percent annually, compute the present value of each alternative: (Do not round intermediate calculations. Round your final answers to 2 decimal places.)A woman who has won a prize is offered a lump sum of K600,000 to invest now, or K350,000 to invest at the end of this year and another K350,000 to invest at the end of the following year. If all investments are assumed to earn 20% pa, which should she choose if she intends to withdraw the money after (a) 6 years, (b) 2 years.