As the winner of the Standup sweepstakes, you are entitled to one of the following prizes:

$999,999 payable immediately.
$125,000 per year forever (1st payment is a year from today).
$185,000 per year for 10 years (1st payment is received immediately).

The stated annual interest rate is 14 percent. Rank the alternatives in order of preference showing work (or relevant inputs to a program) for full credit.

Solutions

Expert Solution

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

As the winner of the Standup sweepstakes, you are entitled to one of the following prizes:...

As the winner of the Standup sweepstakes, you are entitled to one of the following prizes: $999,999 payable immediately. $125,000 per year forever (1st payment is a year from today). $185,000 per year for 10 years (1st payment is received immediately). The stated annual interest rate is 14 percent. Rank the alternatives in order of preference showing work (or relevant inputs to a program) for full credit.

As winner of a breakfast cereal competition, you can choose one of the following prizes: a....

As winner of a breakfast cereal competition, you can choose one of the following prizes: a. $180,000 at the end of five years. b. $11,400 a year forever. c. $19,000 for each of 10 years. d. $6,500 next year and increasing thereafter by 5% a year forever. Assume that the discount rate is 12%. i. (20 pts) Write down the discounted cash flow equation for each option.

As a winner of a lottery you can choose one of the following prizes: 1) £1...

As a winner of a lottery you can choose one of the following prizes: 1) £1 million now. 2) £1.5 million at the end of six years. 3) £80,000 a year forever, starting in one year. 4) £150,000 for each of the next ten years, starting in one year. If the discount rate is 8 per cent, which is the most valuable prize?

As a winner of a breakfast cereal competition, you can choose one of the following prizes:...

As a winner of a breakfast cereal competition, you can choose one of the following prizes: a) 11,000 a year (forever) and starting NEXT year b) 12,000 a year (forever) and starting THIS year c) 3,000 next year and increasing thereafter by 2% a year forever d) 7,000 starting this year, geowing at 1% per annum e) 800,000 at the end of 20 years f) 6,000 a year for 5 years starting next year g) 1,000 a year starting this...

As a winner of a breakfast cereal competition, you can choose one of the following prizes:...

As a winner of a breakfast cereal competition, you can choose one of the following prizes: $100,000 now. $100,000 at the end of 5 years. $10,000 a year forever (starting from this year). $11,000 a year forever (starting from next year). $2,000 next year and increasing thereafter by 2% a year forever $6,000 starting this year, growing at 1% per annum $800,000 at the end of 20 years $5,000 a year for 5 years starting next year $1,000 a year,...

Prizes and the chances of winning in a sweepstakes are given in the table below. Prize...

Prizes and the chances of winning in a sweepstakes are given in the table below. Prize Chances $10,000,000 1 chance in 200,000,000 $350,000 1 chance in 200,000,000 $25,000 1 chance in 90,000,000 $5,000 1 chance in 4,000,000 $400 1 chance in 500,000 A watch valued at $90 1 chance in 4,000 (a) Find the expected value (in dollars) of the amount won by one entry. (b) Find the expected value (in dollars) if the cost of entering this sweepstakes is...

Suppose that an Irish Sweepstakes winner deposits $10 million in cash into her transactions account at...

Suppose that an Irish Sweepstakes winner deposits $10 million in cash into her transactions account at the Bank of America. Assume a reserve requirement of 25 percent and no excess reserves in the banking system prior to this deposit. Show the changes on the Bank of America balance sheet when the $10 million is initially deposited.

One state lottery has 1,100 prizes of $1; 135 prizes of $10; 15 prizes of $50;...

One state lottery has 1,100 prizes of $1; 135 prizes of $10; 15 prizes of $50; 5 prizes of $310; 2 prizes of $1,150; and 1 prize of $2,500. Assume that 22,0000 lottery tickets are issued and sold for $1. Round final answer to four decimals. 1. What is the lottery's expected profit per ticket? 2. What is the lottery's standard deviation of profit per ticket?

One state lottery has 1,100 prizes of $1; 120 prizes of $10; 30 prizes of $50;...

One state lottery has 1,100 prizes of $1; 120 prizes of $10; 30 prizes of $50; 5 prizes of $285; 2 prizes of $1,180; and 1 prize of $2,400. Assume that 34,000 lottery tickets are issued and sold for $1. Round to 4 decimal places for the answers What is the lottery's expected profit per ticket? What is the lottery's standard deviation of profit per ticket?

One state lottery has 1,000 prizes of $1; 130 prizes of $10; 20 prizes of $55;...

One state lottery has 1,000 prizes of $1; 130 prizes of $10; 20 prizes of $55; 5 prizes of $300; 2 prizes of $1,010; and 1 prize of $2,500. Assume that 31,000 lottery tickets are issued and sold $1 What is the lottery's expected profit per ticket? What is the lottery's standard deviation of profit per ticket?

Subjects