3. Kelsey just won the lottery, and she must choose among three award options .She can...

3. Kelsey just won the lottery, and she must choose among three award options .She can elect (1) to receive a lump sum today of $62 million, (2) to receive end-of-month payments of $0.8 million for 10 years or (3) to receive end-of month payments of $0.47 million for 30 years. If she can earn 9% annually (i.e., the discount rate is 9% per year), which is the best choice based on the PV of the three award options?

a) PV of 1st award option:

b) PV of 2nd award option:

N= I/YR= PMT= FV= PV=

c) PV of 3rd award option

N= I/YR= PMT= FV= PV=

d) Which is the best choice for Kelsey?

4. Suppose Sam deposits $100 in an account at the end of this year, $300 at the end of the next two year, $50 at the end of the following year. If the annual interest rate is 4%, how much will be in the account immediately after the fourth deposit is made? Do you think it is enough to purchase a $785 airline ticket to Paris?

0 1 2 3 4 Years

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4%

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0 100 300 300 50

Expert Solution

jeff jeffy answered 1 year ago

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