You have just won a $5,000,000 lottery! You can collect $3,000,000 now or wait 5 years...

You have just won a $5,000,000 lottery! You can collect $3,000,000 now or wait 5 years to collect the full amount. Assume an APR of 5%. Which is the best alternative?

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

As nothing was mentioned excel is used. If you need with formula, let me know, will do that also. Thank you.

jeff jeffy answered 1 month ago

Next > < Previous

Related Solutions

After years of playing the lottery, you just won $10,000,000. Now, you have to figure out...

After years of playing the lottery, you just won $10,000,000. Now, you have to figure out how you want it paid to you. You can take a lump sum now before tax, (yes, Uncle Sam will eventually get his part), or you can take annual payments at the end of each year (also before tax). The interest rate is 4% and if you do take the payments, they will be paid over 20 years. 1) What is the lump sum...

Linus has just won the "Wait To Spend" lottery. SpecificallyLinus has won the lump sum...

Linus has just won the "Wait To Spend" lottery. Specifically Linus has won the lump sum amount of $1250 but he must wait until the end of 8 years to receive the money. Linus is in need of cash and would rather receive a different pattern of payments: $375 today and then receive some unknown LUMP SUM (i.e. one time) amount that will be received in 8 years. Using an interest rate of14.50%, determine the unknown lump sum amount that...

You have just won a lottery of $1 million and you can chooseamong the following...

You have just won a lottery of $1 million and you can choose among the following three payout options. The effective annual interest rate (EAR) is 5%. Option A: $100,000 every two years, starting 2 years from now and ending 20 years from now. Option B: $100,000 a year at the end of the next 10 years, with the first payment one year from today. Option C: $500,000 right now and $500,000 exactly 20 years from now. Please calculate the...

You have just won the $1,000,000 in the lottery. You have the option of taking a...

You have just won the $1,000,000 in the lottery. You have the option of taking a lump sum payout or equal annualized payments over 20 years. Ignoring any tax consequences; how much should you expect from the annualized payments. What target interest rate would make the annualized payments more valuable than the lump sum. In your response, you may want to consider such issues as inflation, investing lump sum in stock market (What have been the long-term historic returns?) to...

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

You just won the initial school of finance lottery! You have won $10,000 today, $20,000 five...

You just won the initial school of finance lottery! You have won $10,000 today, $20,000 five years from today, and $50,000 ten years from today. As an alternative, you can receive your winnings as a 15 year annuity with the first payment received ten years from today. If you require a 6% return on your investment, how much annuity pay you each for you to select that option?

Time Value of Money COLLAPSE You have just won the $1,000,000 in the lottery. You have...

Time Value of Money COLLAPSE You have just won the $1,000,000 in the lottery. You have the option of taking a lump sum payout or equal annualized payments over 20 years. Ignoring any tax consequences; how much should you expect from the annualized payments. What target interest rate would make the annualized payments more valuable than the lump sum. In your response, you may want to consider such issues as inflation, investing lump sum in stock market (What have been...

1. You have just won the prize in the State lottery. A recent innovation is to...

1. You have just won the prize in the State lottery. A recent innovation is to offer prize winners a choice of payoffs. You must choose one of the following prizes: a. $1,000,000 paid immediately b. $600,000 paid exactly one year from today, and another $600,000 paid exactly 3 years from today c. $70,000 payment at the end of each year forever (first payment occurs exactly 1 year from today) d. An immediate payment of $600,000, then beginning exactly 5...

Manuel just won the lottery and the prize was $ 1 million. You have the option...

Manuel just won the lottery and the prize was $ 1 million. You have the option of receiving a lump sum of $ 312,950 or $ 50,000 per year for the next 20 years. If Miguel can invest the single amount at 9% or invest the annual payments at 7%; Which one should I choose? a. one-time amount of 312,950 b. b. annual payments of 50,000

You have just won the lottery and will receive $500,000 in one year. You will receive...

You have just won the lottery and will receive $500,000 in one year. You will receive payments for 25 years, and the payments will increase 4 percent per year. If the appropriate discount rate is 11 percent, what is the present value of your winnings? 5,511,586 $29,258,112 $36,804 $29,258,112 $5,741,235

Subjects