23. Suppose you just won the state lottery, and you have a choice between receiving $2,550,000 today or a 20-yearannuity of $250,000, with the first payment coming one year from today. What rate of return is built into theannuity? Disregard taxes.z17.22

Step 1: Given Value for Calculation Present Value of Annuity = pv = $2,550,000Time = t = 20…

Answered: 23. Suppose you just won the state…

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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6. You are comparing two annuities with equal present values. The applicable discount rate is8.75 percent. One annuity pays $5,000 on the first day of each year for 20 years. How much doesthe second annuity pay each year for 20 years if it pays at the end of each year?
12. Which of these is an example of a single-payment fixed annuity? An annuity with a minimum APR of 3.4% into which you invest a lump sum of $12,500. An annuity with an APR of 3.4% into which you invest a lump sum of $12,500 An annuity with an APR of 3.4% into which you invest $2500 each year. An annuity with a minimum APR of 3.4% into which you invest $2500 each year.
3. You won the lottery! You are considering whether or not to accept a lump sum amount or an annual annuity of $ 79,944 to be received at the end of every year for twelve years. Use 6% as the annual discount rate. How much is the stream of payments worth now? Round your answer to the nearest whole number.
8
3. The average American has $91 lying about. Stick $91 in an ordinary annuity account each year for 12 years at 4% interest compounded annually and watch it grow. What is the cash value of this annuity at the end of year 12?
118.) Your aunt Meg has given you perpetuity for your birthday. You will receive your first payment of $8000 one year from today. If the interest rate is 100%, what is the present value of your birthday gift? $4000 $6000 $7000 $8000
Subject:- finance
vear fromLIow. urn I, Wa. the payments occurred i orever? 5. Caiculating Annuity Cash Flows. If you put up $20,000 today in exchange for a 8.5 percent, 12-year annuity, what will the annual cash flow be?
5. Present value of annuities and annuity payments The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. An annuity that pays $500 at the beginning of every six months An annuity that pays $1,000 at the end of each year An annuity that pays $500 at the end of every six months An annuity that pays $1,000 at the beginning of each year You bought an annuity selling at $2,867.74 today that promises to make equal payments at the beginning of each year for the next twelve years (N). If the annuity's appropriate interest rate (1) remains at 9.50% during this time, then the value of the annual annuity payment (PMT) is $375.00 You just won the lottery. Congratulations! The jackpot is $35,000,000, paid in twelve equal annual payments. The first payment on the…
F1. Please answer fast
7. What's the future value of a 7%, 5-year ordinary annuity that pays $600 each year? If this was an annuity due, what would its future value be? Do not round intermediate calculations. Round your answers to the nearest cent. Future Value of an Ordinary Annuity: $ Future Value of an Annuity Due: $
2. Mr. and Mrs. Rich are interested in purchasing an annuity that will pay them $2,500.00 per month starting next month for 25 years. If the best rate of return that they could get is 4.65% compounded semi-annually, calculate using both the algebraic and the calculator method, a) how much should they pay now for this annuity? P/Y C/Y I/Y PV PMT FV b) Calculate the total interest paid over the term of the annuity. P/Y C/Y N I/Y PV PMT FV

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23. Suppose you just won the state lottery, and you have a choice between receiving $2,550,000 today or a 20-year annuity of $250,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes. z 17.22