1. You recently won a lottery and have the option of receiving one of the following three prizes: (1) $64,000 cash immediately. (2) $20,000 cash immediately and a six-year annual annuity of $8,000 beginning one year from today, or (3) a six-year annual annuity of $13,000 beginning one year from today. Assuming an interest rate of 6% compounded annually, determine the preser value for the above options. Which option should you choose? 2. A company wants to accumulate a sum of money to repay certain debts due in the future. The company will make annual deposits of $100,000 into a special bank account at the end of each of 10 years. Assuming the bank account pays 7% interest compounded annually, what will be the fund balance after the last payment is made in ten years?
1. You recently won a lottery and have the option of receiving one of the following three prizes: (1) $64,000 cash immediately. (2) $20,000 cash immediately and a six-year annual annuity of $8,000 beginning one year from today, or (3) a six-year annual annuity of $13,000 beginning one year from today. Assuming an interest rate of 6% compounded annually, determine the preser value for the above options. Which option should you choose? 2. A company wants to accumulate a sum of money to repay certain debts due in the future. The company will make annual deposits of $100,000 into a special bank account at the end of each of 10 years. Assuming the bank account pays 7% interest compounded annually, what will be the fund balance after the last payment is made in ten years?
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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![Exercise 5-15 (Static) Future and present value [LO5-3, 5-7, 5-8]
Answer each of the following independent questions.
1. You recently won a lottery and have the option of receiving one of the following three prizes: (1) $64,000 cash immediately. (2)
$20,000 cash immediately and a six-year annual annuity of $8,000 beginning one year from today, or (3) a six-year annual
annuity of $13,000 beginning one year from today. Assuming an interest rate of 6% compounded annually, determine the present
value for the above options. Which option should you choose?
2. A company wants to accumulate a sum of money to repay certain debts due in the future. The company will make annual
deposits of $100,000 into a special bank account at the end of each of 10 years. Assuming the bank account pays 7% interest
compounded annually, what will be the fund balance after the last payment is made in ten years?
Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1)
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
You recently won a lottery and have the option of receiving one of the following three prizes: (1) $64,000 cash immediately,
(2) $20,000 cash immediately and a six-year annual annuity of $8,000 beginning one year from today, or (3) a six-year
annual annuity of $13,000 beginning one year from today. Assuming an interest rate of 6% compounded annually, determine
the present value for the above options. Which option should you choose?
Note: Round your final answers to nearest whole dollar amount.
Annuity
Payment
PV Annuity
Immediate
Cash
PV Option
Option 11
Option 21
+
Option 3
+
+
Which option should you choose?
Required 1
Required 2
<Required 1
Required 2 >
Show less A
A company wants to accumulate a sum of money to repay certain debts due in the future. The company will make annual
deposits of $100,000 into a special bank account at the end of each of 10 years. Assuming the bank account pays 7% interest
compounded annually, what will be the fund balance after the last payment is made in ten years?
Note: Round your final answers to nearest whole dollar amount.
Table, Excel, or calculator function:
Payment:
Future value:
n =
=!
Show less A](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe32c30df-73b1-4886-ae63-13035e49e264%2F7ecfc0be-ed32-43a8-838a-3681e53a14f8%2Fjq3dz4t_processed.png&w=3840&q=75)
Transcribed Image Text:Exercise 5-15 (Static) Future and present value [LO5-3, 5-7, 5-8]
Answer each of the following independent questions.
1. You recently won a lottery and have the option of receiving one of the following three prizes: (1) $64,000 cash immediately. (2)
$20,000 cash immediately and a six-year annual annuity of $8,000 beginning one year from today, or (3) a six-year annual
annuity of $13,000 beginning one year from today. Assuming an interest rate of 6% compounded annually, determine the present
value for the above options. Which option should you choose?
2. A company wants to accumulate a sum of money to repay certain debts due in the future. The company will make annual
deposits of $100,000 into a special bank account at the end of each of 10 years. Assuming the bank account pays 7% interest
compounded annually, what will be the fund balance after the last payment is made in ten years?
Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1)
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
You recently won a lottery and have the option of receiving one of the following three prizes: (1) $64,000 cash immediately,
(2) $20,000 cash immediately and a six-year annual annuity of $8,000 beginning one year from today, or (3) a six-year
annual annuity of $13,000 beginning one year from today. Assuming an interest rate of 6% compounded annually, determine
the present value for the above options. Which option should you choose?
Note: Round your final answers to nearest whole dollar amount.
Annuity
Payment
PV Annuity
Immediate
Cash
PV Option
Option 11
Option 21
+
Option 3
+
+
Which option should you choose?
Required 1
Required 2
<Required 1
Required 2 >
Show less A
A company wants to accumulate a sum of money to repay certain debts due in the future. The company will make annual
deposits of $100,000 into a special bank account at the end of each of 10 years. Assuming the bank account pays 7% interest
compounded annually, what will be the fund balance after the last payment is made in ten years?
Note: Round your final answers to nearest whole dollar amount.
Table, Excel, or calculator function:
Payment:
Future value:
n =
=!
Show less A
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