Present value analysis, Rita Gonzales won the $60 million

Present value analysis

Reference no: EM1328876

Question 1

You invest $2,500 a year for three years at 8 percent.

a. What is the value of your investment after one year? Multiply $2,500 X 1.08.

b. What is the value of your investment after two years? Multiply your answer to part a by 1.08.

c. What is the value of your investment after three years? Multiply your answer to part b by 1.08. This gives your final answer.

d. Confirm that your answer is correct by using Excel formulas.

Question 2

Rita Gonzales won the $60 million lottery. She is to receive $1 million a year for the next 50 years plus an additional lump sum payment of $10 million after 50 years. The discount rate is 10 percent. What is the current value of her winnings?

Reference no: EM1328876

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