If you were the $10,000,000 winner of the Mega-Millions Lottery, which payout option would be the smartest to take financially if you believe you can earn 5.2% annually on an investment? Option A: $333,333.33 every year for 30 years. Option B: $10,000,000 lump sum now
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If you were the $10,000,000 winner of the Mega-Millions Lottery, which payout option would be the smartest to take financially if you believe you can earn 5.2% annually on an investment?
Option A: $333,333.33 every year for 30 years.
Option B: $10,000,000 lump sum now
Step by step
Solved in 2 steps
- How much would you invest today in order to receive $30,000 in each of the following (for further Instructions on present value In Excel, see Appendix C): A. 10 years at 9% B. 8 years at 12% C. 14 years at 15% D. 19 years at 18%If you invest $15,000 today, how much will you have in (for further instructions on future value in Excel, see Appendix C): A. 20 years at 22% B. 12 years at 10% C. 5 years at 14% D. 2 years at 7%How much would you invest today in order to receive $30,000 in each of the following (for further instructions on present value in Excel, see Appendix C): A. 20 years at 22% B. 12 years at 10% C. 5 years at 14% D. 2 years at 7%
- Assume you win a lottery, and you are offered the following stream of payments by the lottery commission: $25,000 today, $32,000 one year from now, another $32,000 two years from now, and a final payment of $55,000 three years from now. You accept the offer. If you invest all of these proceeds at 6% compounded annually and extract nothing from the investment, how much will you have at the end of the fourth year? Excel Formula PleaseYou are the lucky winner of the Ohio Lottery ! Congratulations. The Lottery tells you that you have won a $20,000,000 prize that will be paid in annual installments of $1,000,000 for 20 years. If interest rates on alternative investments in the market are 8%, what is the actual value (PV) of your prize? Round to the nearest 1,000, and show your work.Assume you win a lottery, and you are offered the following stream of payments by the lottery commission: $25,000 today, $32,000 one year from now, another $32,000 two years from now, and a final payment of $55,000 three years from now. You accept the offer. If you invest all of these proceeds at 6% compounded annually and extract nothing from the investment, how much will you have at the end of the fourth year?
- Martin Holmes holds the winning ticket for the 69 million mega lottery. Now he needs to decide which alternative to choose: (1) a $44 million lump-sum payment today or (2) a payment of $3.3 million per year for 30 years. The first payment will be made today. If Martin’s opportunity cost is 7 percent, which alternative should he choose? Explain by showing your calculations.Suppose that you won $3,000,000/- in a lottery. You are given the option to take $100,000/- at the end of each year for 30 years or take $1,500,000/- now. If your bank is giving 6% interest on investments. Calculate and decide which option you should takeYou have just won 50 million in the lottery, payable in equal yearly installments over the next 20 years (first payment to be made immediately). Instead of taking the annual payments, you also have the option of receiving a lump sum amount immediately. If the interest rate is 6% per year, what is the minimum lump sum amount you would except in place for the payments? What if the interest rate is 10% per year? Please show the formula and answer.
- How much would you accept in a lump sum today, in place of a lottery payment of $35,000 at the end of the next 20 years ($700,000 in total), assuming you could invest it at a 6 percent rate?A $1,000,000 lottery prize pays $50,000 per year for the next 20 years. If the current rate of return is 4.5%, what is the present value of this prize? An insurance policy offers you the option of being paid $750 per month for 20 years or a lump sum of $50,000. Which has the greater value if the current rate of return is 4.5% compounded monthly and you expect to live for at least 20 years? A bond issued by Live Nation is currently trading at $89.50, pays a coupon rate of 5.625%, and matures in 12 semesters. Using the bond yield calculator, what is its yield to maturity?You just won the lottery and are offered the following payout: $1,000,000 immediately plus another 6 payments that increase by $500,000 per year. Thus in year one, you receive $1,500,000, etc. The EAR you expect to earn on reinvestment of your money is 8.5%. What is the minimum amount you should be willing to accept as a lump sum today rather than the payout over time?
