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? How does the return given in the form of EAR impact your answer?

Q: Suppose you just won the state lottery, and you have a choice between receiving $3,550,000 today or…

A: Choice-1 Amount to receive today is $3,550,000 Choice -2 Annuity amount is $250,000 Time period is…

Q: You are trying to decide how much to save for retirement. Assume you plan to save $7500 per year…

A: Present Value means value of future benefits at the current date. The formula for the same is as…

Q: You would like to have ​$   59,000 in   15 years.  To accumulate this​ amount, you plan to…

A: The concept of time value of money tells us that worth of money keeps on changing with passage of…

Q: When you retire, you plan to draw $50,000 per year from your retirement accounts, which will be…

A: Annuity is the no. of payments which are equal in size and made in equal interval of time. Person…

Q: Ms. Cruz can buy a piece of property for ₱6,500,000 cash or ₱4,000,000 down payment and ₱4,200,000…

A: In this question, we have to analyze the two option of buying the property one is cash basis and…

Q: 1. You decide to give SCU an endowment that will pay out $50 K per year forever, with a continuously…

A: Hello. Since you have posted multiple questions and not specified which question needs to be solved,…

Q: An investment will generate $9,000 a year for 20 years. If you can earn 9 percent on your funds and…

A: “Since you have asked multiple questions, we will solve the one question for you. If you want any…

Q: Martin Holmes holds the winning ticket for the 69 million mega lottery. Now he needs to decide which…

A: Investment management refers to the handling of financial assets and other investments, not only…

Q: You have just won the lottery and will receive $550,000 in one year. You will receive payments for…

A: Receipt in year 1 = $ 550,000 Annual growth rate = 3% Discount rate = 10%

Q: Please show excel formulas.

A: According to the time value of money, the value of money obtained today is greater than the value of…

Q: You win at a lottery that pays you $1000 a week for life! (a) Assuming that a year counts 365.25…

A: Since the lottery pays $1000 a week A. Total week in a year = 365.257 = 52.17 weeks Total annual…

Q: Assume you win a lottery, and you are offered the following stream of payments by the lottery…

A: Future value of cash flows will be reflective of the value of cash flows in the future after…

Q: You have just won the lottery and will receive $1,000,000 in one year. You will receive payments for…

A: The present value of the growing annuity is the current worth of a cash flow series growing at a…

Q: Consider the following situation, which requires comparison of options.Cousin Thaddeus offers to pay…

A: Annuities are insurance contracts that promise to pay you regular income either immediately or in…

Q: You just won a $625,000 lottery prize!  You will receive $25,000 per year for the next 25 years,…

A: Using present value of annuity due formulae, PV of annuity due = PMT * [1-(1/(1+r)^n)/r] * (1+r)

Q: You just won the Florida lottery. To receive your winnings, you must select ONE of the twofollowing…

A: While evaluating two financial options, we must take into consideration the importance of present…

Q: If you were the $10,000,000 winner of the Mega-Millions Lottery, which payout option would be the…

A: The concept of the time value of money states that the same amount of money is worth more now than…

Q: If you were to invest $50,000 from you lottery winnings today, how much will it be worth in 20 years…

A: To find the future value after some specific some time can be found out by the formula of future…

Q: Assume that you just won the state lottery. Your prize can be taken either in the form of 100,000 at…

A: Series of payment made at equal interval is called Annuity.

Q: a.  If his opportunity cost is 9​% compounded​ annually, what value should he place on this…

A: Time value of money (TVM) refers to the method used to measure the amount of money at different…

Q: You have won the lottery! The lottery officials have given you a choice between receiving (A)…

A: Solution Given Two options are (A) $15,000,000 today, or (B) $1,000,000 at the end of each of the…

Q: How much would you accept in a lump sum today, in place of a lottery payment of $35,000 at the end…

A: Formula:

Q: You have received $200,000 from the PowerBall Lottery and want to have half that amount available…

A: Total lottary amount = $200,000 Amount required at retirement (FV) = $200,000/2 = $100,000 Interest…

Q: Your cousin Vance tells you that you can invest $15,000 in his business, and he will pay you back…

A: An investment is refer as an asset purchased with intention to earn income at some time in future.…

Q: You expect to receive $150,000 per year on a contract that will last 5 years. You are trying to…

A: Present value of future cash inflows will be equal to the worth of contract today.   Worth of…

Q: You have won the lottery, and you must choose between three award options. You can select one of the…

A: Formula required  Present value FACTOR =1-(1+r)^-n/r  Present value =Future value/(1+r)n r=interest…

Q: You are offered ​$100,000 today or ​$300,000 in 13 years. Assuming that you can earn 11 percent on…

A: Rate of return (r) = 0.11 or 11% Period (p) = 13 years Future value (FV) = $300,000 Present value…

Q: You just won the lottery and are offered the following payout: $1,000,000 immediately plus another 6…

A: Payout: Immediate Payment = 1,000,000 Yearly Payments =  Year Payment 1 500,000.00 2…

Q: Suppose you just won the state lottery, and you have a choice between receiving $3,600,000 today or…

A: An annuity is the series of fixed payment which will be received in certain intervals. The rate of…

Q: An investment will generate $12,000 a year for 30 years. If you can earn 12 percent on your funds…

A: Question is based on the concept of Annuity

Q: Brianca plans to save $5,000, $1,000, and $42,000 a year over the next three years, respectively.…

A: Time value It tells that value received today has more value than that of receiving the same amount…

Q: You just won the TVM Lottery. You will receive $1 million today plus another 10 annual payments that…

A: A theory that helps to compute the present or future value of the cash flows is term as the TVM…

Q: Suppose you're fresh out of college and have a new job where you're able, by being frugal, to put…

A: Time Value of Money states that a dollar today is worth more than a dollar later because it has…

Q: You win a lottery payout of $10,000 a year for the next 30 years. If your investment rate is 8…

A: Present Value:  The present value (PV) is the present sum of a series of fixed payments. The series…

Q: You want to have $2,000,000 in net worth when you retire. To achieve this goal, you plan to invest…

A: Given Data: Future value (amount on retirement) = $2,000,000 Yearly Investment (PMT) = $1000…

Q: You just won a special lottery which will entitle you to an annual payment $45000 for 10 years, but…

A: In this we have to calculate future value FACTOR and future value.

Q: Norwood Investments is putting out a new product. The product will pay out $25,000 in the first…

A: Value of perpetuity is present value of cash flow for perpetuity.

Q: You have recently inherited a sum of $100,000. The current market rate is 5% p.a. and you are…

A: Amount inherited = $100,000 Current Market Rate = 5% Amount expected every year indefinitely = $6000…

Q: You are offered $90,000 today or $300,000 in 11 years. Assuming that you can earn 14 percent on your…

A: We should choose the alternative that has a higher present worth. Alternative 1 has a present worth…

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.