You just won the Publisher's Clearing House Sweepstakes and the right to 20 after-tax ordinary annuity cash flows of 163,291.18. Assuming a discount rate of 7.50, what is the present value of your lottery winnings?
Use a calculator to determine your answer.
A) 3,265,823.60
B) 1,789,520.81
C) 1,664,670.52
D) There is not enough information to answer this question.
Question 2
Which of the following parity conditions is (are) correct?
A) The purchasing-power parity theory states that in the long run exchange rate changes tend to
reflect international differences in inflation rates.
B) The interest-rate parity theory states that the forward premium/discount should be equal and
opposite in size to the national interest rate differential.
C) The international Fisher effect states that national interest rate differentials are the result of
inflation differentials.
D) All of the above are correct.
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In 2008, the U.S. economy suffered a gaping wound as several trillion dollars were ripped out of it.
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Determine the nominal annual rate of interest of the following ordinary general annuity.