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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Suppose you just won the state lottery, and you have a choice between receiving $2,515,000 today or a 20-year annuity of $220,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes. O a. 6.88% O b. 12.96% O c. 6.04% O d. 5.69% O e. 8.75%
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Aa.37.
A) suppose be $22,168.70 not sure formula is correct
1. Today, the maximum amount of money that Ramesh is willing to pay for a certain perpetuity is $2,000. Assuming the interest rate and the annual payments remain the same, what is the maximum amount of money that Ramesh should be willing to pay for the same perpetuity exactly two years from today? a. Any amount greater than $2000.00 but less than $2332.80, if the discount rate is more than 8% p.a. \ b. Any amount greater than $1714.68 but less than $2000.00 if the discount rate is less than 8% p.a. c. Any amount less than $1714.68 if the discount rate is less than 8% p.a. d. Any amount greater than $2332.80 if the interest rate is more than 8% p.a. e. None of the answers listed above is correct.
1.
Having an issue with this problem. Thank you!
g What is the future value of an ordinary annuity of S10 compounded at 10 percent? What would be the future value if it were an an- nuity due? h. You have just borrowed $100,000, and you agree to pay it back over the next 25 years in 25 equal end-of-year payments plus 10 percent compound interest on the unpaid balance. What will be the size of these payments? LWhat is the present value of a $1,000 perpetuity discounted back to the present at 8 percent? 000 per year for 7 years
May I ask for an explanation and solution to the question for a better understanding. Thank you! 5. What is the future value of a 5-year ordinary annuity with annual payments of P200, evaluated at a 7.5% semi-annual interest rate? a. P1,161.68 b. P1,348.48 c. P3,828.34 d. P287.13
1) What is the future value of $5480 6 years from now at 7 percent? 2) What is the future value of $2100 saved each year for 9 years at 10 percent? 3) What is the amount a person would have to deposit today (present value) at 11 percent interest rate to have $8500 saved 9 years from now. 4) What is the amount you would have to deposit today to be able to take out $2070 a year for 2 years from an account earning 14 percent. 5) If you desire to have $38300 for a down payment for a house in 11 years, what amount would you need to deposit today? Assume that your money will earn 4 percent. 6) If you desire to have $38300 for a down payment for a house in 11 years, what amount would you need to deposit today? Assume that your money will earn 4 percent. 7) Carla Lopez deposits $11100 a year into her retirement account. If these funds have an average earning of 3 percent over the 14 years until her retirement, what will be the value of her retirement account? 8) If a person spends $28 a week…
6. You are contemplating the purchase of a twenty-four year (variable) annuity that promises cash flows in the following pattern, repeating every four years: 1e 2e 3e 4e 21e 24 22 23 $1,600- $1,500- $1,400 $1,300- $1,600 $1,500 $1,400 $1,300 Suppose you don't like the fluctuations in the amount of your annual benefits.e a. What annual rate of return would you use to convert these (end-of-year) cash flows to equal annual (end-of-year) amounts if you required an APR of 14.4%, compounded monthly?e b. Without prejudice to your answer in part a, suppose that your required annual rate of return is 15%, what equal annual (beginning-of-year) payments over the twenty-four year period would be equivalent to the cash flow stream depicted above?
Suppose you just won the state lottery, and you have a choice between receiving $2,625,000 today or a 20-year annuity of $270,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes. a. 7.83% b. 10.29% c. 8.13% d. 12.04% e. 9.38%

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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