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) $90,000 cash immediately, (2) $35,000 cash immediately and a six-year annual annuity of $9,400 beginning one year from today, or (3) a six-year annual annuity of $17,700 beginning one year from today. Assuming an interest rate of 5% 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 $180,000 into a special bank account at the end of each of 10 years. Assuming the bank account pays 6% 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. (FV 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) $90,000 cash immediately, (2) $35,000 cash immediately and a six-year annual annuity of $9,400 beginning one year from today, or (3) a six-year annual annuity of $17,700 beginning one year from today. Assuming an interest rate of 5% 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 1 + = $ 0 Option 2 + = $ 0 Option 3 + Π $ 0 Which option should you choose? < Required 1 Required 2 > Show less▲
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) $90,000 cash immediately, (2) $35,000 cash immediately and a six-year annual annuity of $9,400 beginning one year from today, or (3) a six-year annual annuity of $17,700 beginning one year from today. Assuming an interest rate of 5% 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 $180,000 into a special bank account at the end of each of 10 years. Assuming the bank account pays 6% 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. (FV 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) $90,000 cash immediately, (2) $35,000 cash immediately and a six-year annual annuity of $9,400 beginning one year from today, or (3) a six-year annual annuity of $17,700 beginning one year from today. Assuming an interest rate of 5% 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 1 + = $ 0 Option 2 + = $ 0 Option 3 + Π $ 0 Which option should you choose? < Required 1 Required 2 > Show less▲
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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Transcribed Image Text: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) $90,000 cash immediately, (2)
$35,000 cash immediately and a six-year annual annuity of $9,400 beginning one year from today, or (3) a six-year annual
annuity of $17,700 beginning one year from today. Assuming an interest rate of 5% 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 $180,000 into a special bank account at the end of each of 10 years. Assuming the bank account pays 6% 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. (FV 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) $90,000 cash immediately,
(2) $35,000 cash immediately and a six-year annual annuity of $9,400 beginning one year from today, or (3) a six-year
annual annuity of $17,700 beginning one year from today. Assuming an interest rate of 5% 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 1
+
=
$
0
Option 2
+
=
$
0
Option 3
+
Π
$
0
Which option should you choose?
<
Required 1
Required 2 >
Show less▲
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