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Author Question: What is the present value of a lottery paid as an annuity due for twenty years if the cash flows are ... (Read 109 times)

oliviahorn72

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on: Jul 10, 2018
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

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Reply #1 on: Jul 10, 2018
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


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oliviahorn72

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Reply #2 on: Jul 10, 2018
TY


Tabitha_2016

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Reply #3 on: Jul 10, 2018
Happy to Help


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