Suppose you win a raffle held at a neighborhood elementary school fundraiser and are given the choice between two different ways to be paid. You can either accept the money in a lump sum immediately or in a series of payments over time. If you choose the lump sum payout, you receive $3,000 today. If you choose to collect payments over time, you receive three payments: $1,000 today, $1,000 1 year from today, and $1,000 2 years from today. At an interest rate of 5% per year, the winner would be better off accepting the value. since that choice has the greater present At an interest rate of 10% per year, the winner would be better off accepting A couple years after you win the raffle, you and your friend are back at the same event. This time, your friend gets lucky and wins the contest, and you both realize the payout schemes are the same as they were back when you won. They now face the decision between collecting their prize as a lump sum or as a series of payments over time. Based on your experience, which piece of advice will be most helpful to your friend? O The lump sum is always better. The payments over time are always better. OIt will depend on the interest rate; advise her to get a calculator. O None of these answers is good advice. since it has the greater present value.

Compound interest is a very powerful way to save for your retirement. Saving a little and giving it time to grow is often more effective than saving a lot over a short period of time. To illustrate this, suppose your goal is to save $1 million by the age of 70. What amount of money will be saved by socking away $3,038 per year starting at age 23 with a 7% annual interest rate. Will you achieve your goal using the long-term savings plan? What amount of money will be saved by socking away $20,406 per year starting at age 48 at the same interest rate? Will you achieve your goal using the short-term savings plan? Click the icon to view the interest and annuity table for discrete compounding when i = 7% per year. C The future equivalent of the long-term savings plan is $ 1,000,184. (Round to the nearest dollar.) You will achieve your goal using the long-term savings plan. The future equivalent of the short-term savings plan is $. (Round to the nearest dollar.)

James has been working as a Mechanical Engineer ever since he graduated five years ago. Two years ago, he bought and financed a new $25,000 Jeep Compass and still owes $15,750 on his car loan. He has never been late with a car payment. James has one major credit card, with a $1,000 limit. He has had it since his senior year of college and was two months late with a payment one time during that first year. He is currently carrying a balance of $600 on this card. In the last year, James applied for six store credit cards at places that he shops a lot so that he can earn points and get discounts. He carries no balances Part 1: Calculate James’ credit score. Recalculate his credit score if he had not opened the six store credit cards.   Part 2: James is tired of paying rent and would like to purchase a condo so that he can start building equity in his home. He is looking for a 30-year mortgage to purchase a $240,000 condo. What interest rate does James qualify for on a mortgage with his…

If Phil borrows $25,000 from a loan company at an interest rate of 3.5% per year compounded weekly, and plans to make a payment of $850 per quarter, how may years will it take him to pay off the loan?If Phil borrows $25,000 from a loan company at an interest rate of 3.5% per year compounded weekly, and plans to make a payment of $850 per quarter, how may years will it take him to pay off the loan?