Question

Question 9 (of 10) value 1.00 points You have just won the lottery. You will receive $2,520,000 today, and then receive 40 payments of $1,260,000 These payments will start one year from now and will be paid every six months. A representative from Greenleaf Investments has offered to purchase all the payments from you for $20 million. The interest rate is an APR of 10 percent compounded daily. Assume there are 12 months in a year, each with 30 days What is the present value of the cash flows from your lottery winnings? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Present value References eBook & Resources Worksheet Section: 4.3 Compounding Periods Difficulty: 3 Section: 4.4 Simplifications

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

V A ENG 0524 16 01 2020 23 GR690 for X GN GM GO G P - GO GR GS GT GU GV GW GX - effective six month rate = (1+ daily rate) 180 - 1 now APR = 10%, so daily rate = 10%/360 = 0.02777778% effective six month rate = effective six month rate = (1+0.00027777778)^180 - 1 5.12637973% 666 667 668 669 670 671 672 673 674 675 676 677 678 679 680 now PVA = PVA = PVA = PMT*(1/r)*(1-(1/(1+r)^n)) 1260000*(1/0.0512637973)*(1-(1/(1+0.0512637973)^40)) 21251453.00 Now as payment starts from 6 months from today PV = PVA/(1+r) PV = 21251453/(1+0.0512637973) PV = 20215147.76 681 682 ANSWER SO VALUE OF WINNINGS TODAY 2520000+ 20215147.76 = 22735147.76 683 684 685 686 ANSWER DO NOT ACCEPT GREENLEAF INVESTMENT OFFER AS THEY ARE OFFERING "LOWER" AMOUNT THAN PRESENT VALUE OF WINNINGS 687 688 689 690 691 692 693 ... LOAN OPTIONS pv, fv, annuity CAP STRU VALUE PM, PMT loan with points LOCK BOX DILUTION DOLLAR COST AVG EXPONPER APR CPI ear FVA pva s2 53 ST....

V A ENG 0520 16 01 2020 23 EL E EK EL EM EN EO EPEQER ESET EU EVEW EX INDIFFERENT PRESENT VALUE OF PLAN X = PRESENT VALUE OF PLAN Y A/r = (A/r)*(1-(1/(1+r)^n)) 10000/r = (25000/r)*(1-(1/(1+r)^16)) REMOVE (1/r) FROM BOTH SIDES 10000= 25000*(1-(1/(1+r)^16)) 0.4 = (1-(1/(1+r)^16)) 0.6 = (1/(1+r)^16) (1+r)^16 = 1.666666667 (1+r) = 1.6667^(1/16) (1+r) = 1.032441723 p = 0.032441723 r = 3.24% ANSWER 47 ... LOAN OPTIONS pv, lv, annuily CAP STRU VALUE PM, PMT loan with points LOCK BOX DILUTION DOLLAR COST AVG EXPO NPER APR CPI eat PVA pva s2 53 ST... 6