Author Question: What is the present value of a lottery paid as an annuity due for twenty years if the cash flows are ... (Read 81 times)

oliviahorn72

  • Hero Member
  • *****
  • Posts: 579
What is the present value of a lottery paid as an annuity due for twenty years if the cash flows are 250,000 per year and the appropriate discount rate is 7.50?
 
  A) 5,000,000.00
  B) 3,186,045.39
  C) 2,739,769.55
  D) 2,548,622.84

Question 2

A wealthy woman just died and left her pet cats the following estate: 50,000 per year for the next 15 years with the first cash flow today. At a discount rate of 3.2, what is the feline estate worth in today's dollars?
 
  A) 588,352.84
  B) 607,180.14
  C) 750,000.00
  D) 774,000.00



Tabitha_2016

  • Sr. Member
  • ****
  • Posts: 344
Answer to Question 1

Answer: C
Explanation: C)
PV = PMT   (1 + r)1
= 250,000   (1.075)1 = 2,739,769.55.

MODE = BEGIN
INPUT 20 7.5 ? -250,000 0
KEY N I/Y PV PMT FV
CPT 2,739,769.55

Answer to Question 2

Answer: B
Explanation: B)
PV = PMT   (1 + r)1
= 50,000   (1.032)1 = 607,180.14.

MODE = BEGIN
INPUT 15 3.2 ? -50,000 0
KEY N I/Y PV PMT FV
CPT 607,180.14



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question


 

Did you know?

Only 12 hours after an egg cell is fertilized by a sperm cell, the egg cell starts to divide. As it continues to divide, it moves along the fallopian tube toward the uterus at about 1 inch per day.

Did you know?

Individuals are never “cured” of addictions. Instead, they learn how to manage their disease to lead healthy, balanced lives.

Did you know?

The people with the highest levels of LDL are Mexican American males and non-Hispanic black females.

Did you know?

Looking at the sun may not only cause headache and distort your vision temporarily, but it can also cause permanent eye damage. Any exposure to sunlight adds to the cumulative effects of ultraviolet (UV) radiation on your eyes. UV exposure has been linked to eye disorders such as macular degeneration, solar retinitis, and corneal dystrophies.

Did you know?

Warfarin was developed as a consequence of the study of a strange bleeding disorder that suddenly occurred in cattle on the northern prairies of the United States in the early 1900s.

For a complete list of videos, visit our video library