Lottery. Your dreams of becoming rich have just come true. You have won the State of Tranquility's Lottery. The State offers you two payment plans for the $5,000,000 advertised jackpot. You can take annual payments of $250,000 at the end of the year for the next 20 years or $2,128,391 today. a. If your investment rate over the next 20 years is 12%, which payoff will you choose? b. If your investment rate over the next 20 years is 9%, which payoff will you choose? c. At what investment rate will the annuity stream of $250,000 be the same as the lump-sum payment of $2,128,391? a. If your investment rate over the next 20 years is 12%, what is the present value of the $250,000 annual payments today? (Round to the nearest dollar.)

Lottery. Your dreams of becoming rich have just come true. You have won the State of Tranquility's Lottery. The State offers you two payment plans for the $5,000,000 advertised jackpot. You can take annual payments of $250,000 at the end of the year for the next 20 years or $2,128,391 today. a. If your investment rate over the next 20 years is 12%, which payoff will you choose? b. If your investment rate over the next 20 years is 9%, which payoff will you choose? c. At what investment rate will the annuity stream of $250,000 be the same as the lump-sum payment of $2,128,391? a. If your investment rate over the next 20 years is 12%, what is the present value of the $250,000 annual payments today? (Round to the nearest dollar.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 22P

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