Gail has won a lottery that pays her $100,000 at the end of this year and increases by 15 percent per year thereafter for 30 years. Leon has offered Gail $10,500,000 today in exchange for all the money she will receive. If Gail can get 6 percent interest on her savings, is this a good deal? What is the present value of the lottery winnings?

Gail has won a lottery that pays her $100,000 at the end of this year and increases by 15 percent per year thereafter for 30 years. Leon has offered Gail $10,500,000 today in exchange for all the money she will receive. If Gail can get 6 percent interest on her savings, is this a good deal? What is the present value of the lottery winnings?

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter6: Saving And Investing

Section: Chapter Questions

Problem 18AA

See similar textbooks

Similar questions

could you show how to determine the bond's present value without a calculator?
If you deposit $4,800 at the end of each of the next 15 years into an account paying 11.3 percent interest, how much money will you have in the account in 15 years? How much will you have if you make deposits for 30 years?
Suppose that you saved $4,700 at the beginning of the year and that at the end of the year your savings account has $6,100 in it. What interest rate did you earn?
6. Alex invested a certain amount to a business and promised to pay him back with 1.8 times his original investment. They agreed to have it compounded monthly within 9 years. What is the nominal rate of interest r in percent?
You can invest in an account that pays simple interest or an account that pays compound interest. In either case, you plan to invest $2,900 today and both accounts have an annual interest rate of 8 percent. How much more interest will you receive in the 11th year in the account that pays compound interest?
You take out a loan of $12,000 to pay for a piece of equipment. You plan to repay the loan in 16 years. You can afford to pay a maximum of $1,100 each year. What interest rate would allow for you to pay off the entirely of the loan in equal payments?
Sara wants to have $600,000 in her savings account when she retires. How much must she put in the account now, if the account pays a fixed interest rate of 8%, to ensure that she has $600,000 in 20 years? Select one: a. $231,712 b. $139,541 c. $128,729 d. $180,221
MULTIPLE-CHOICE QUESTION How does compounding interest help you grow wealth over time? because your contributions to investment accounts grow steadily O because interest rates always increase over time O because interest payments are continually added to the principal
3. You are looking to retire in 35 years and your company has a 401K plan that has a 5.2% annual return. You deposit $400 a month from your paycheck into the account. Calculate the amount of your retirement when you retire.
Annuity Suppose that you are thinking of buying a car that yields a rental of $5,000 each year for 3 years and then can be sold for scrap value of $8,000. With an interest rate of 10 percent, how much would we be willing to pay?
Calculate the present value of an annuity with monthly deposits of $2,000 at 5% for 20 years. Discuss how the present value of an annuity will change if the deposit is doubled?
How much money will be in a bank account at the end of 15 years if $100 is deposited today and the interest rate is 8 percent compounded annually?