Luis won the lottery; however, the lottery company gave him the following two options to receive his prize money: Option (a): $8,000 in two months and $18,000 in eleven months. Option (b): $4,000 immediately and $24,000 in fourteen months. Assume that money earns 4.5% p.a. simple interest and use today as the focal date. a. What was the equivalent value of the payments under option (a) at the focal date? $0.00 Round to the nearest cent b. What was the equivalent value of the payments under option (b) at the focal date? $0.00 Round to the nearest cent c. Which option would be economically better for Luis and by how much? o a. Option (a) o b. Option (b) is better by $0.00 Round to the nearest cent
Luis won the lottery; however, the lottery company gave him the following two options to receive his prize money: Option (a): $8,000 in two months and $18,000 in eleven months. Option (b): $4,000 immediately and $24,000 in fourteen months. Assume that money earns 4.5% p.a. simple interest and use today as the focal date. a. What was the equivalent value of the payments under option (a) at the focal date? $0.00 Round to the nearest cent b. What was the equivalent value of the payments under option (b) at the focal date? $0.00 Round to the nearest cent c. Which option would be economically better for Luis and by how much? o a. Option (a) o b. Option (b) is better by $0.00 Round to the nearest cent
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter9: Current Liabilities, Contingencies, And The Time Value Of Money
Section: Chapter Questions
Problem 9.20MCE
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