What is your payoff is you select the cash option

Assignment Help Finance Basics

Reference no: EM13281230

You are the proud winner of the multi - state Sour Ball Lottery. You are to receive $2,000,000 at the end of each year for the next 20 years. While the Lottery Commission refers to this as a $40,000,000 jackpot, if you choose the "cash option" they will give you much less than that; you can receive a lump sum payment today equal to the present value of the ordinary annuity instead of the 20 annual payments. If the discount rate that the Lottery Commission uses to determine the lump sum payoff is 7%, what is your payoff is you select the cash option?

A. $39,707,503
B. $26,945,332
C. $21,188, 028
D. $42,977,401

Reference no: EM13281230

Questions Cloud

Find coefficient of friction between wood board and grass : you are helping a friend you estimate it takes a force of 1665.5N to draw everything across the level grass at a constant speed. what is the coefficient of friction between the wood board and grass

Define and discuss the importance of the time value of money : Define and discuss the importance of the time value of money concepts including compounding (future value), discounting (present value), and annuities. Why do organization leaders need to understand these concepts?

Explain the role the government plays in personal finance : Explain the role the government plays in personal finance (focus on regulations, laws, economic policy, etc.).

A basic copper carbonate contains copper and carbon by mass : Basic copper carbonate contains 57.48% copper and 5.43% carbon by mass. What mass of copper in g is contained in 7.061 kg of basic copper carbonate

What is your payoff is you select the cash option : If the discount rate that the Lottery Commission uses to determine the lump sum payoff is 7%, what is your payoff is you select the cash option?

Find her altitude as she crosses the bar : A 48 kg pole vaulter running at 11 m/s vaults over the bar. Her speed when she is above the bar is 1.0 m/s. determine her altitude as she crosses the bar

What is the payment pattern : Review the payout ratio over a 10-year time period. What is the payment pattern? What does this tell you about the firm in the life-cycle? This question is for both Walmart and Target please help

What is the npv of his retainer offer : Assuming that Dewey's cost of capital is 12% EAR, what is the NPV of his retainer offer?

Find price for call option : Find price for call option. Use Black Scholes to calculate. The current price of stock = $32, the strike price = $35, the time to expiration = 6 months, the annualized risk-free rate = 3%, the variance of stock return = 0.26. Round answer to neare..

User Account

All Pages