What is the present value of winnings

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1. An insurance company offers to pay a client an annuity of $12,000 per year for 10 years in exchange for $83,509.27 today. What is the return on this investment measured in percentage terms? Round to two decimal places and use Excel to show work.

2. Jennifer had won $100,000,000 in the New York lottery, so the state will pay her 20 annual payments of $5,000,000 each beginning immediately. If the rate of return on securities of similar risk to the lottery earnings is 6 percent, what is the present value of her winnings? Please show work.

Problem 3

Suppose that an insurance company offers to pay you an annuity of $12,000 per year for 10 years in exchange for $83,509.27 today. What is the return on this investment measured in percentage terms? (Hint: This is an ordinary annuity. Round to two decimal places. Use Excel or a financial calculator to solve this problem).

Reference no: EM132554376

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