Congratulations! You have won the lottery! You are offered a choice of $1,000,000 up front or an annuity of $100,000 per year for 20 years. Your personal discount rate is 0.04. If you are an economically rational actor, you should:
Congratulations! You have won the lottery! You are offered a choice of $1,000,000 up front or...
Congratulations, you won a lottery of $10 million! You are offered three options to receive your windfall: A) A lump sum of $10 million received immediately B) An annual payment of $500,000 for 30 years C) A monthly payment of $50,000 for 30 years a. If the discount rate is 7%, which option would you choose? Show your work. b. Calculate the effective annual rate for option C.
You just won the state lottery. The state gives you the choice of $1,000,000 today or a 20-year annuity of $94,390, with the first payment coming one year from today. What rate of interest is built into the annuity?
Congratulations! You have just won the State Lottery. The lottery prize was advertised as an annualized $105 million paid out in 30 equal annual payments beginning immediately. The annual payment is determined by dividing the advertised prize by the number of payments. Instead you could take a one lump cash prize of the present value of all the annuity payments using a 4.5% discount rate. You now have up to 60 days to determine whether to take the cash prize...
You have won the lottery and your prize is $1,000,000. Since the parentheses on said that the winner had the option of taking a lump sum or an annuity you have to decide the best deal for you. Your choices are: 1) $1,000,000 in 10 years, present Valve 2) 10 annual payments of $100,000 which begin in one year, Nesen vowe Or, 3) a lump sum of $675,000. You figure you could earn 8% on your money. Ignoring taxes, which...
You have just won the lottery and will receive $1,000,000 in one year. You will receive payments for 25 years and the payments will increase by 3.5 percent per year. If the appropriate discount rate is 7.5 percent, what is the present value of your winnings? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value
Congratulations, you have just won $10,000,000 in the Power Ball Lottery. However, as is often the custom with lotteries, you have the following choices: Alternative A: taking the entire ten million dollars in one lump sum today Alternative B: receiving $500,000 at the end of the year for each of the next 20 years. Please send your computed answers base on both alternatives to me along with your reasoning why you choose either alternative A or alternative B. If the...
Congratulations! You have won a state lottery. The state lottery offers you the following (after-tax) payout options: Option #1: $15,000,000 after five years. Option #2: $2,150,000 per year for five years. Option #3: $13,000,000 after three years. Assuming you earn 8% on your funds, which option would you prefer? Requirements: Find PV of each option, and determine which is the best option.
Suppose you just won the state lottery, and you have a choice between receiving $2,700,000 today or a 20-year annuity of $250,000, with the first payment coming one year from today. Assuming both choices have the same present value, what rate of return is built into the annuity? Disregard taxes.
You have just won “$10,000,000” in a lottery. However, when you go to collect your check you find that the “$10,000,000” is actually payments of $1,000,000 per year for the next 10 years. How much should you be willing to accept now, in a lump sum, if your opportunity cost discount rate is 10%? Round your answer to the nearest dollar.
Growing Annuity [LO1] You have just won the lottery and will receive $1,500,000 in one year. You will receive payments for 30 years, and the payments will increase by 2.7 percent per year. If the appropriate discount rate is 6.8 percent, what is the present value of your winnings?