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Author Question: Your plans for the future have finally materialized because you have won the lottery. ... (Read 45 times)

SAVANNAHHOOPER23

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on: Jul 11, 2018
Your plans for the future have finally materialized because you have won the lottery.
 
  Congratulations The lottery marketing material says you have won 20,000,000 but a more careful examination of the terms and conditions means that you have won twenty 1,000,000 beginning-of-the-year cash flows with the first cash flow today. Further, the lottery contract says that instead of waiting for so many years to collect your winnings, you could accept a lump sum check today in the amount of 12,000,000. If you determine that the appropriate interest rate to compare these two alternatives is 6, which alternative is preferred? To answer this question, solve for the present value of each alternative and make your decision based strictly on the values. You may ignore taxes in your decision

Question 2

Opening a retail charge account is one way of establishing a credit record.
 
  Indicate whether the statement is true or false


efwsefaw

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Reply #1 on: Jul 11, 2018
Answer to Question 1

PV of the annuity is 12,158,116.45 and is therefore the preferred choice.

Answer to Question 2

TRUE


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SAVANNAHHOOPER23

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Reply #2 on: Jul 11, 2018
Thank you :)


efwsefaw

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Reply #3 on: Jul 11, 2018
Happy to help you


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