You’ve just won the lottery which promises to pay you $5,000 per month for the next...

You’ve just won the lottery which promises to pay you $5,000 per month for the next 30 years, starting in one month. The lottery company is require to buy US Treasury securities to guarantee that it can meet its obligation to you. If Treasury securities earned 5% APR compounded monthly, how much would the lottery company have to invest today to cover its obligation?

Expert Solution

	Investment today	P×[1-(1÷(1+r)^n)]÷r

	Here,

1	Interest rate per annum	5.00%
2	Number of years	30
3	Number of compoundings per per annum	12
4 = 1÷3	Interest rate per period ( r)	0.42%
5 = 2×3	Number of periods (n)	360
	Payment per period (P)	$ 5,000

	Investment today	$ 931,408
		5000*[1-(1/(1+0.42%)^360]/0.42%

jeff jeffy answered 2 years ago

You just won $1,000,000 in the lottery. This lottery will pay you $1 a year for...

You just won $1,000,000 in the lottery. This lottery will pay you $1 a year for a million years. Using a martket discount rate of 5% compound annually, what is the current value of this prize? $20 $67 $24.67 $16.66 $12

Consider an insurance policy that promises to pay the holder $788 per month for the next...

Consider an insurance policy that promises to pay the holder $788 per month for the next 20 years. The first payment will be one month after the purchase of the policy. (This type of policy is called a term annuity.) The appropriate discount rate is an APR of 8.98%, compounded monthly. What is the value of this policy? Round your answer to the nearest dollar.

Consider an insurance policy that promises to pay the holder $972 per month for the next...

Consider an insurance policy that promises to pay the holder $972 per month for the next 20 years. The first payment will be one month after the purchase of the policy. (This type of policy is called a term annuity.) The appropriate discount rate is an APR of 6.52%, compounded monthly. What is the value of this policy? Round your answer to the nearest dollar.

Assume that you just hit the $9 million jackpot in a lottery, which promises you a...

Assume that you just hit the $9 million jackpot in a lottery, which promises you a payment of $3 million for the next three years. Since we've established that the jackpot will not be worth $9 million in today's dollars, how much is it worth if the interest rate is 12 percent? (Hint: the first payment is made immediately.) $nothing million

You have just won $1,000,000 in the Tennessee Lottery. You will receive payments of $40,000 per...

You have just won $1,000,000 in the Tennessee Lottery. You will receive payments of $40,000 per year (at the end of each year) for the next 25 years. If the discount rate is 8 percent, what are your winnings worth today? How would I input this information using a financial calculator?

1. You have just won a Colorado Lottery prize that will pay annual payments $7,573 forever....

1. You have just won a Colorado Lottery prize that will pay annual payments $7,573 forever. You would rather have a lump sum today rather than the future payments. If you wanted o discount those payments by 11.0%, the value of that prize in todays dollars would be $__.__. 2. Suppose that you were to receive $105 at the end of year one, $230 at the end of year 2, and $352 at the end of year three. If the...

You recently learned that you won an online sweepstakes that promises to pay you (or your...

You recently learned that you won an online sweepstakes that promises to pay you (or your designee) $15,000 annually forever. The payments will begin in one year. What is the present value of your winnings if the market rate is 5%

Congratulations! You have just won the State Lottery. The lottery prize was advertised as an annualized...

Congratulations! You have just won the State Lottery. The lottery prize was advertised as an annualized $105 million paid out in 30 equal annual payments beginning immediately. The annual payment is determined by dividing the advertised prize by the number of payments. Instead you could take a one lump cash prize of the present value of all the annuity payments using a 4.5% discount rate. You now have up to 60 days to determine whether to take the cash prize...

You just won the lottery and will receive $14,000 at the end of each of the...

You just won the lottery and will receive $14,000 at the end of each of the next 10 years. Your friend offers to give you a flat $100,000 for the 10 years' worth of income flows right now. If you expect a return of 7% on any surefire investment, how much do you think these lottery winnings are worth to you today? (FORMAT: XX,XXX.XX DO NOT INCLUDE A DOLLAR SIGN)

You can pay $91 per month, starting next month, for the next 5 years to have...

You can pay $91 per month, starting next month, for the next 5 years to have a lawn mowing service. Alternatively, you can purchase a riding lawn mower and pay $506 today and mow your own lawn for 5 years, starting next month. If you decide to mow your own lawn, how much do you save in PV terms if your investments earn 3.31% APR, compounded monthly? Note: If you would lose money, make your answer with a negative sign...

Question