Question

Alex Meir recently won a lottery and has the option of receiving one of the following three prizes: (1) $98,000 cash immediately, (2) $40,000 cash immediately and a six-period annuity of $9,900 beginning one year from today, or (3) a six-period annuity of $19,800 beginning one year from today. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) 1. Assuming an interest rate of 6%, determine the present value for the above options. Which option should Alex choose? 2. The Weimer Corporation wants to accumulate a sum of money to repay certain debts due on December 31, 2030. Weimer will make annual deposits of $200,000 into a special bank account at the end of each of 10 years beginning December 31, 2021. Assuming that the bank account pays 6% interest compounded annually, what will be the fund balance after the last payment is made on December 31, 2030? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Assuming an interest rate of 6%, determine the present value for the above options. Which option should Alex choose? (Round your final answers to nearest whole dollar amount.) PV Annuity Immediate Cash PV Option + Annuity Payment Option 1 Option 2 Option 3 Which option should Alex choose? + + Required 1 Required 2 >

Answer 1

	Annuity	PV	+	Immediate cash	PV Option
Option 1	0	0		98000	98,000
2	9900	48681.27		40000	88,681
3	19800	97362.54		0	97,363
Option 1 should be chosen
Payment	200000
n	10
i	6%
Future value	2,636,160

A 1. в Annuity O 9900 19800 с PV O =B3*4.9173 =B4*4.9173 D E F + Immediate cash PV Option 98000 =C2+E2 40000 =C3+E3 =C4+E4 2 Option 1 3 2 4 3 5 Option 1 should be chosen 6 7 Payment 8 n 9 i 10 Future value 200000 10 0.06 =B7*13.1808