How much in total would she have received

Assignment Help Microeconomics

Reference no: EM131021109

A winner of the Pennsylvania Lottery was given the choice of receiving $18 million at once or $1,440,000 per year for 25 years.

a. If the winner had opted for the 25 annual payments, how much in total would she have received?

b. At an interest rate of 10 percent, what would be the present value of the 25 payments?

c. At an interest rate of 5 percent, what would be the present value of the 25 payments?

d. What interest rate would make the present value of the 25 payments equal to the one payment of $18 million? (This question is difficult and requires the use of a financial calculator or a spreadsheet. Hint: If you are familiar with the Excel spreadsheet program, use the RATE function. You can answer parts (b) and (c) by using the Excel PV [Present Value] function.)

Reference no: EM131021109

Questions Cloud

Theresas flower garden has 750 bonds outstanding that are : Theresa's Flower Garden has 750 bonds outstanding that are selling for $989 each, 2,500 shares of preferred stock with a market price of $47 a share, and 30,000 shares of common stock valued at $56 a share. What weight should be assigned to the commo..

Removal of director in directors'' meeting or shareholders : Removal of director in directors' meeting or shareholders' meeting (because directors are shareholders in this company)?

What is the value of the cpi : Given the above information, what is the value of the CPI in 2015 when the base year is 2013 and what is the value of the CPI in 2015 when the base year is 2014? Assume that the CPI is measured on a 100-point scale and is rounded to the nearest wh..

Find the vertex and intercepts of function : Find the vertex and intercepts of function f(x)=x2+x-2. Graph the linear equation y=2/3(x)-2. Find the x and y intercepts of 4x+3y=-12.

How much in total would she have received : A winner of the Pennsylvania Lottery was given the choice of receiving $18 million at once or $1,440,000 per year for 25 years. If the winner had opted for the 25 annual payments, how much in total would she have received?

Same discount rate to determine the bond values : A 6% coupon bond, an 8% coupon bond, and a 10% coupon bond, all with the same maturity, bond covenants and other provisions, are issued by the same firm under equal market conditions; therefore investors use the same discount rate to determine the bo..

Accurate tax return budgets two direct labor hours for every : Accurate Tax return budgets two direct labor hours for every tax return that it prepares, at a standard cost of $32.00 an hour. During the most recent year, 500 returns were completed with the labor cost totaling $26,000. The actual labor cost was $5..

Find intervals of increase and decrease for given function : Find the intervals of increase and decrease for f(x) = 6x3 + 54x2 - 228x - 7. Whaqt is an equation for the tangent line to the curve y = (3x2 + x - 1)9at the point where x = 0.

What was the present value of hamilton contract : The contract also specified that $2 million would be given to a charity. Assume that Hamilton receives each of his five seasonal salaries as a lump-sum payment at the end of the season. Some newspaper reports described Hamilton as having signed a $..

User Account

All Pages