Calculate the present value of the payments

Assignment Help Financial Management

Reference no: EM133710296 , Length: word count:500

Instructions

Answer these questions in a 1 to 2-page paper.

Question 1. You have just won the Strayer Lottery jackpot of $11,000,000. You will be paid in twenty-six equal annual installments beginning immediately. If you had the money now, you could invest it in an account with a quoted annual interest rate of 9% with monthly compounding of interest.

i. Calculate the present value of the payments you will receive. Show your calculations using formulas in your paper or in an attached spreadsheet file.

ii. Explain why there is a difference between the present value of the Strayer lottery jackpot and the future value of the twenty-six annual
payments based on your calculations and the information provided.

Question 2. Discuss the risk and return indicated by different bond ratings. Support your answer with references to your research.

i. Use various bond websites to locate one of each of the following bond ratings: AAA, BBB, CCC, and D. Research the differences between the bond ratings, the required interest rates, and the risk. List the websites used as sources for this research.

ii. Identify the strengths and weaknesses of each rating.

This course requires the use of Strayer Writing Standards (SWS).

Reference no: EM133710296

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