The prize in last week’s lottery was estimated to be worth $90 million. If you were lucky enough to win, the payment will be $3.6 million per year over the next 25 years. Assume that the first installment is received immediately. If interest rates are 6%, what is the present value of the prize? If interest rates are 6%, what is the future value after 25 years? How would your answers change if the payments were received at the end of each year? How would your answers change if the interest rate was higher?
The prize in last week’s lottery was estimated to be worth $90 million. If you were lucky enough to win, the payment will be $3.6 million per year over the next 25 years. Assume that the first installment is received immediately. If interest rates are 6%, what is the present value of the prize? If interest rates are 6%, what is the future value after 25 years? How would your answers change if the payments were received at the end of each year? How would your answers change if the interest rate was higher?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 22P
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The prize in last week’s lottery was estimated to be worth $90 million. If you were lucky enough to win, the payment will be $3.6 million per year over the next 25 years. Assume that the first installment is received immediately.
- If interest rates are 6%, what is the present value of the prize?
- If interest rates are 6%, what is the
future value after 25 years? - How would your answers change if the payments were received at the end of each year?
- How would your answers change if the interest rate was higher?
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