Suppose you won a lottery 600000 interest of 0.05 percent, they offered you many choices the first one is to take the 600000 immediately • 2nd choice to take 110000 forever • 3rd choice to take 90000 for 7 years beginning now. • 4th choice is to accept 3200000 at the end of the 20 years • 5th choice if you put 600000 in a saving account how much you will have after 30 years interest is compound quarterly what is the value of the money from choice number 2? what is the value of the money from choice number 3? what is the value of the money from choice number 4? what is the value of the money from choice number 5?

Suppose you won a lottery 600000 interest of 0.05 percent, they offered you many choices the first one is to take the 600000 immediately • 2nd choice to take 110000 forever • 3rd choice to take 90000 for 7 years beginning now. • 4th choice is to accept 3200000 at the end of the 20 years • 5th choice if you put 600000 in a saving account how much you will have after 30 years interest is compound quarterly what is the value of the money from choice number 2? what is the value of the money from choice number 3? what is the value of the money from choice number 4? what is the value of the money from choice number 5?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You just won the Florida lottery. To receive your winnings, you must select ONE of the twofollowing choices:1. You can receive $1,000,000 a year at the end of each of the next 30 years.2. You can receive a one-time payment of $15,000,000 today.Assume that the current interest rate is 6%. Which option is most valuable?
Just suppose your won a lottery of $1,000,000 and you have the option to receive it today or in 2 installments of $500,000 over the period of 2 years. Interest rate is 10%. Which option would you prefer and why?
You have won the lottery! The lottery officials have given you a choice between receiving (A) $15,000,000 today, or (B) $1,000,000 at the end of each of the next 20 years. Assuming a market interest rate of 4% (compounded annually), which option is worth more to you today, and by how much?
You have just received notification that you have won the $2.5 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you're around to collect), 77 years from now. What is the present value of your windfall if the appropriate discount rate is 10 percent? Multiple Choice O $1,494.48 $1,591.95 $1,656.93 $1,624.44 $8,283.38
The winner of a lottery is given a choice of $1,000,000 cash today or $2,000,000 paid out as follows: $100,000 cash per year for 20 years with the first payment today and 19 subsequent annual payments thereafter. The inflation rate is expected to be constant at 4%/yr over the award period and the winner’s TVOM (real interest rate) is 3.5%/yr. Solve, a. Which choice is better for the winner? Neglect the effect of taxes, life span, and uncertainty. b. At what value of inflation are the two choices economically equivalent? c. What would you do if you do NOT neglect the effect of life span and uncertainty?
Assume you won a worldwide lottery that pays $1.55 million in year 0, $5 million in year 1, and $200,000 in years 5 through 100. Assuming that 100 years is as “long” as infinity, calculate the perpetual equivalent annual worth for years 1 through infinity at an interest rate of 10% per year. (Enter your answer in dollars and not in millions.) The perpetual equivalent annual worth for years 1 through infinity is $ .
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.
You Just won a lottery that promise to pay you 100,000 exactly 10 years from now. Because the 100,000 is guaranteed by the government, opportunities exist to sell the claim today for an immediate single cash payment. a- What is the least you will sell your claim for it you can earn the following rates of retum on similar risk investment during the 10-year period? 1- 5% 2- 8% 3- 11% b- Rework on part a under the assumption that 100,000 payment will be received in 15 years rather than 10 years. c- Explain why you want or do not want to explain you claim.
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?
You won $100 000. 00 in a lottery and you want to set some of that sum aside for10 years. After 10 years, you would like to receive $2400.00 at the end of every3 months for 8 years. How much of your winnings must you set aside if interestis 5.5% compounded quarterly?
*a-* You Just won a lottery that promise to pay you 100,000 exactly 10 years from now. Because the 100,000 is guaranteed by the government, opportunities exist to sell the claim today for an immediate single cash payment. a- What is the least you will sell your claim for it you can eam the following rates of retum on similar risk investment during the 10-year period? 1- 5%2- 8%3- 11% *B* - Rework on part a under the assumption that 100,000 payment will be received in 15 years rather than 10 years. *C* - Explain why you want sell the claim or do not want sell , explain you forme *a* and *b*
You have just received notification that you have won the $1 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you're around to collect), 80 years from now. What is the present value of your windfall if the appropriate disc ount rate is 7.25 percent? The computation is wrong as 1.07 rasied to 80 is not 62....

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