You have just received notification that you have won the $2.04 million first prize in the...

You have just received notification that you have won the $2.04 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you’re around to collect), 82 years from now.

What is the present value of your windfall if the appropriate discount rate is 8 percent?

Solutions

Expert Solution

amount of prize received in 82 years from now (future value)= 2040000

discount rate (i) = 8%

years gap from today (n) = 82

present value of amount = future value/(1+i)^n

=2040000/(1+8%)^82

=3705.802052

present value of your windfall is $3705.80

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

You have just received notification that you have won the $1 million first prize in the...

You have just received notification that you have won the $1 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you’re around to collect), 80 years from now. What is the present value of your windfall if the appropriate discount rate is 8.45 percent? (Do not round intermediate calculations and enter your answer in dollars, not millons of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.)

You have just received notification that you have won the $2 million first prize in the...

You have just received notification that you have won the $2 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you’re around to collect), 70 years from now. What is the present value of your windfall if the appropriate discount rate is 8 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)

Calculating Present Values [LO2] You have just received notification that you have won the $2 million first prize in the Centennial Lottery.

Calculating Present Values [LO2] You have just received notification that you have won the $2 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you’re around to collect), 80 years from now. What is the present value of your windfall if the appropriate discount rate is 8.4 percent?

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

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...

Congratulations! You have won the $ 1 million lottery grand prize. You have been presented with...

Congratulations! You have won the $ 1 million lottery grand prize. You have been presented with several payout alternatives, and you have to decide which one to accept. The alternatives are as follows: $1 million today $1.2 million lump- sum in two years. $1.5 million lump-sum in five years. $2 million lump-sum in eight years. Your cousin, s stockbroker, advises you that over the long-term you should be able to earn ten percent on an investment portfolio. You are intrigued...

You have just won first prize in the publisher’s book contest. You are given the following payoff options: Option 1. $7,000,000 today

You have just won first prize in the publisher’s book contest. You are given the following payoff options:Option 1. $7,000,000 todayOption 2. $2,000,000 today plus $225,000 per year forever beginning one year from today.At what interest rate are you indifferent between options 1 and 2?

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...

Today is January 1st and you have just won Publisher Clearinghouse’s grand prize of four perpetuities....

Today is January 1st and you have just won Publisher Clearinghouse’s grand prize of four perpetuities. The first perpetuity will pay you $2,000 every year on April 1st, with the first payment occurring exactly three months from today. The second perpetuity will pay you $3,000 every year on July 1st, with the first payment occurring exactly six months from today. The third perpetuity will pay you $4,000 every year on October 1st, with the first payment occurring exactly nine months...

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...

Subjects