Decides to take the present value payment

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Tracy won a $100 million jackpot. She can receive the jackpot as a $5 million payment each year for 20 years, or she can ask to receive the present value of all those payments all at once now. Assume an annual interest rate of 5 percent. If she decides to take the present value payment, about how much will she receive?

$52.1 million

$71.4 million

$62.3 million

$78.6 million

and

Matt, a star basketball player, is looking to join a new NBA team. The Bulls are offering him $24 million for one year. The Heat is offering him $10 million this year and $7.0 million in each of the next two years. The market interest rate is 5 percent. What is the present value of the offer from The Heat in millions (rounded to the nearest one hundred thousand dollars)?

$23.0 million

$24.0 million

$22.5 million

$25.2 million

Reference no: EM13985844

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