Robert has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $125,000 cash payment today. The second option is to receive $21,500 at the end of each of the next 19 years and a $20,500 lump sum payment in the 20th year. Robert can invest money at a 7% rate. Click here to view the factor table. (a) Calculate the present value of the two options. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971.) Present value $ Option 1 $ Which option should Robert choose to receive his winnings? Option 2

Robert has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $125,000 cash payment today. The second option is to receive $21,500 at the end of each of the next 19 years and a $20,500 lump sum payment in the 20th year. Robert can invest money at a 7% rate. Click here to view the factor table. (a) Calculate the present value of the two options. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971.) Present value $ Option 1 $ Which option should Robert choose to receive his winnings? Option 2

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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Daniel has just won the Flyball Lottery. Ha has two options for receiving his prize. The first option is to accept a $134,000 cash payment today. The second option is to receive $23,400 at the end of sach of the next 19 years and a $27,300 lump sum payment in the 20th year. Daniel can invest money ata 10% rate. Click hare to view the factor table. (a) Calculate the present value of the two options. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to O decimal place, eg. 58,971) Option 1 Option 2 Present valus Which option should Daniel choose to receive his winnings? (b) IF Daniel could invest money at 13%, calculats the present valus of the two options. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to O decimal place, eg 58,971) Option 1 Option 2 Present valus Which option should he choosa?
Jim has just won the lottery. He is offered 2 choices to access his winnings. Choice A: $90,000 now, Choice B: $10,000 at the end of each year from year 1 to year 5 and $20,000 at the end of each year from year 6 to year 10. Find the discounted present value of these twochoices if the relevant interest rate is 8% per year and state the better choice for Jim?
Kevin is planning for his retirement this year. One option that has been presented to him is the purchase of an annuity that would provide a $45,000 payment each year for the next 12 years. Click here to view the factor table. Calculate how much Kevin should be willing to pay for the annuity if he can invest his funds at 13%. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971.) Payment
Karen White, a lottery winner, will receive the following payments over the next seven years. She has been approached by an investor who will pay Karen a lump sum today for the rights to those future cash flows. If she can invest her cash flows in a fund that will earn 10.7 percent annually, how much should Karen require the investor to pay for the cash flows? (Round answer to 2 decimal places, e.g. 15.25. Do not round factor values.) 1 2 Present value of investment $ 3 4 5 6 7 $326,000 $376,000 $401,000 $426,000 $476,000 $526,000 $676,000 Year
Jane Bauer has won the lottery and has the following four options for receiving her winnings: Receive $100,000 at the beginning of the current year Receive $108,000 at the end of the year Receive $20,000 at the end of each year for eight years Receive $10,000 at the end of each year for 30 years Jane can invest her winnings at an interest rate of 8% compounded annually at a major bank. Use the appropriate present or future value table: FV of $1, PV of $1, FV of Annuity of $1 and PV of Annuity of $1 Calculate the Present value for each of the above options. Round all answers to the nearest dollar. Present Value Option 1 $fill in the blank 1 Option 2 $fill in the blank 2 Option 3 $fill in the blank 3 Option 4 $fill in the blank 4 Which of the payment options should Jane choose?
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Marcus has won a $3,000,000 state lottery. He can take his prize as either 20 yearly payments of $150,000 or a lump sum of $1,275,000. Which is the better option? Assume an interest rate of 10%. Select the correct choice below and, if necessary, fill in the answer box to complete your choice. (Round to the nearest dollar as needed.) O A. The present value of the lottery winnings is $ this is worse than the lump sum of $1,275,000. B. The present value of the lottery winnings is $ this is better than the lump sum of $1,275,000. O C. The present value of the lottery winnings is the same as the lump sum of $1,275,000. Click to select and enter your answer(s) and then click Check Answer. All parts Clear javascript:doExercise(6): a 10:44 PM 10/26/2020 20
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