Mr. Joshua Lacey set the track record in a meet at LSU. For this achievement, he...

Mr. Joshua Lacey set the track record in a meet at LSU. For this achievement, he gets to choose
between a $250 cash prize paid immediately or $30 per year for 10 years. He already has
enough money for now so he decided on the 10 annual installments. However, he is considering
the following two investment options:
a. Save the winnings for the first 3 years and then spend every cent of the winnings in the
remaining 7 years that is collected.
b. Spend everything for the first 3 years then save the remaining 7 years of winnings collected.
i). Draw the cash flow diagram for each option (a) and (b).
ii). Also, if Bank plus is advertising that they can give him a savings ROR of 11% per year, how much
would each option (a) and (b) payout after the installments end? (10 pts)

Solutions

Expert Solution

Since there are some equations, I preferred a handwritten note. Results are tabulated in the answer for your easier understanding. Hope that it is clear for you and it really helped you.

In case of any doubt, please feel free to ask in the comment section. Thank you.

Ally Wells answered 6 months ago

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