lottery winner has a decision between a lump sum of $1,000,000 or a 20 year annuity of $100,000 paid at the end of each of the next 20 years. If the lottery winner could invest or borrow funds at an annual effective interest rate of 5%, which alternative would be preferred and by how much in present value?
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lottery winner has a decision between a lump sum of $1,000,000 or a 20 year
could invest or borrow funds at an annual effective interest rate of 5%, which alternative
would be preferred and by how much in present value?
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- A lottery offers you a choice of $1,000,000 per year for 30 years or a lump-sum payment. What lump-sum payment (rounded to the nearest dollar) would equal the annual payments if the current interest rate is 1.9% compounded annually? (a) State the type. A. amortization B. present value of an ordinary annuity C. future value of an ordinary annuity D.sinking fund E. none of these (b) Answer the question. (Round your answer to the nearest dollar.)A winner of the state lottery was given two choices: receive a single lump sum payment now of $50 million or receive 21 uniform payments, with the first payment to be made now, and the rest to be made at the end of each of the next 20 years. At an interest rate of 4% per year, the amount ofthe 21 uniform payments that would be equivalent to the $50 million lump-sum payment is closest to:a. $3,152,000b. $3,426,800c. $3,623,600d. $3,923,800A lottery winner will receive $1 million at the end of each of the next ten years. What is the future value (FV) of her winnings at the time of her final payment, given that the interest rate is 8.5% per year? A. $14.84 million B. $19.95 million C. $18.95 million D. $13.84 million
- Jane Bauer has won the lottery and has the following four options for receiving her winnings: Receive $100,000 at the beginning of the current year Receive $108,000 at the end of the year Receive $20,000 at the end of each year for eight years Receive $10,000 at the end of each year for 30 years Jane can invest her winnings at an interest rate of 8% compounded annually at a major bank. Use the appropriate present or future value table: FV of $1, PV of $1, FV of Annuity of $1 and PV of Annuity of $1 Calculate the Present value for each of the above options. Round all answers to the nearest dollar. Present Value Option 1 $fill in the blank 1 Option 2 $fill in the blank 2 Option 3 $fill in the blank 3 Option 4 $fill in the blank 4 Which of the payment options should Jane choose?You have won the lottery, and you must choose between three award options. You can select one of the following options: To receive a lump sum today of $75 million, To receive 10 end-of-year payments of $12 million, to receive 30 end-of-year payments of $8 million. If you expect to earn 9% annually: What is the present value of alternative ii? What is the present value of alternative iii? Which one you must choose?The lottery commission is offering the winner of a recent jackpot a payout of 15 yearly payments $209,000 with the first payment occurring one year from today. As an alternative, the commission would also like to offer the winner (and their heirs) a series of yearly payments every year in perpetuity, again with the first payment occurring one year from today. If the commission uses a discount rate of 5%, what payment should the commission offer in the second option in order to make the two options equivalent in present value terms? Enter your answer as a positive number and round to the nearest dollar.
- A lottery winner will receive $1 million at the end of each of the next twelve years. What is the future value (FV) of her winnings at the time of her final payment, given that the interest rate is 8.1% per year? A. $19.09 million B. $30.54 million C. $26.73 million D. $15.27 millionYou are the lucky winner of the Ohio Lottery ! Congratulations. The Lottery tells you that you have won a $20,000,000 prize that will be paid in annual installments of $1,000,000 for 20 years. If interest rates on alternative investments in the market are 8%, what is the actual value (PV) of your prize? Round to the nearest 1,000, and show your work.Marcus has won a $6,000,000 state lottery. He can take his prize as either 15 yearly payments of $400,000 or a lump sum of $2,725,000. Which is the better option? Assume an interest rate of 12%.
- How much would you accept in a lump sum today, in place of a lottery payment of $35,000 at the end of the next 20 years ($700,000 in total), assuming you could invest it at a 6 percent rate?A lottery claims its grand prize is $15 million, payableover five years at $3,000,000 per year. If the firstpayment is made immediately, what is this grand prizereally worth? Use an interest rate of 7%Suppose a state lottery prize of $3 million is to be paid in 5 payments of $600,000 each at the end of each of the next 5 years. If money is worth 11%, compounded annually, what is the present value of the prize? (Round your answer to the nearest cent.)