Consider the decision you might have to make if you won a state lottery. Which would a lump-sum payment of $54,000 today or a payment of $3,500 each year for the next 30 years? Assume a 6% annual interest rate. Lump-sum today of 54,000 O 3.500 each year for 30 years
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- Suppose a state lottery prize of $2 million is to be paid in 20 payments of $100,000 each at the end of each of the next 20 years. If money is worth 11%, compounded annually, what is the present value of the prize? (Round your answer to the nearest cent.) $You have two options for receiving money from an inheritance. Option 1 - Receive a single check for $32,000 in 7 years. Option 2 - Receive $5,250 per year starting 10 years from now and continuing for a total of 10 checks. If your interest rate is 8%, determine which option you would prefer. Explain your choice.If you borrowed $24,000 at 12% annual interest. You agreed to repay the loan with five equal annual payments. How much of the total amount repaid is interest? How much of the third annual payment is interest, and how much principal is there? If you decided to pay off your loan after the third payment, how much will you pay?
- Mr. Smith is planning his retirement. He has decided that he needs to withdraw $12000 per year from his bank account to supplement his other income from Social Security and a private pension plan. How much money should he plan to have in the bank at the start of his retirement, if the bank pays 10% per year, compounded annually, and if he wants money to last for a 12-year retirement period?You have won a lottery that pays you $100,000.00 at the end of this year, $110,000.00 at the end of the second, $120,000.00 the end of the third and so on for thirty years. A friend has offered you $1,200,000.00 today in exchange for all the income you will receive from the lottery win over the next 30 years. If you can get 8% interest on your savings is this a good deal?Bobby has heard the importance of saving early for retirement. He wants to retire in 35 years. But he really likes traveling. Right now, he spends, on average, about $600 a month traveling. He is trying to decide if he should start saving his travel money for retirement now, or if he can continue traveling a few more years before beginning to save. Assume that he can find an annuity that pays 4.75% compounded quarterly. What is his future value if: a) He starts saving now? N: P/Y: I%: C/Y: PMT: End or Begin $54,911.29 $658,935.54 $823,669.42 1,000,000.00
- June has a small house, on a small street, in a small town. If she sells the house now, she will likely get $110, 000 for it. If she waits one year, she will probably receive more- say, $120,000. If she sells the house now, she can invest the money in a 1-year guaranteed growth bond that pays 8% annual interest, compounded monthly. What are the 2 options worth, and which should she choose?1. Mary buys a 20 year annuity immediate for $100,000 subject to 6% effective annual interest rate. The first payment is one year from the time of purchase. Mary reinvests each of the 20 payments, as soon as she received them at the end of each year, into a fund that earns 8% interest on deposits. What is the accumulated amount in Mary's fund right after the 20th annuity payment has been deposited into the fund?A lottery claims its grand prize is $20 million, payable over four years at $4,000,000 per year. If the first payment is made immediately, and the next 4 payments at the end of year 1, year 2, year 3 and year 4, what is this grand prize really worth? Use an interest rate of 8%.
- You are getting a loan to buy your first home. It is a $250,000 home with three bedrooms and two bathrooms. The price is so low because the economy was bad, a lot of people lost their jobs, and few people are buying homes. You got the following information from the bank: Loan Amount: $150,000 Interest Rate 1 month ago: 4.5% Today: 4.1% Loan Period: 15 years (180 months) 1.Based on what you are hearing from friends and what you know about supply and demand in financial markets, what would you predict about the level of interest rates for house loans in the future? Will they stay the same, increase, or decrease? 2.Explain your answer by drawing and explaining two supply and demand curves: one showing the interest rate today (assume it is 4.1%) and one predicting what the interest rate will look like in one month. 3.To help you reach a $16,000 goal 8 years from now, your father offers to give you $4,000 now. You plan to get a part-time job and make five additional deposits, one at the end of each year. (The first deposit is made at the end of the first year.) If all your money is deposited in a bank that pays 6% interest, how large must your annual deposit be?Calculate the annual payouts C to be given for 15 years with an interest rate of 8% on an annuity with a present of value of $150,000. Round your answer to the nearest cent. Do not include the dollar sign in your answer.