Question

please help with problems 1 and 2. thank you

Exercise 1 Your parents have discovered a $12,000 bond at the bottom of their safe deposit box. The bond was given to you by your late grandpa on your fourth birthday. The bond pays an annual interest rate of 11%. Interest accumulates and is paid at the time the bond is redeemed. What is the worth of the bond at the time of your more recent birthday? (principal plus interest) Exercise 2 State lottery jackpots are enormous sums of money, but they're not really as big as they're made out to be. That's because of the time value of money and the way the prizes are paid. Large lottery prizes are typically paid over 25 years, but the lottery authority states the winnings as the sum of the payments without consideration of time value (For example, a $25 million prize is really $1 million a year for 25 years). If a lucky player wants his/her money immediately, he/she has to accept the discounted value of the stream of 25 payments. What is the winner's real cash prize of a $5,000,000 pot if he/she opts for one cash payment now? (Use an interest rate of 8%)

Answer 1

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Ansol Consider the given information Principal c ount = $12,000 Interest rate = 114. let my current age is 24 So total years will be 24-4 »20 years Interest eamed on bond Puderest - Principalamount xycan Yave = 12.000*20x!! = 26,400 Interest eamed 26,400 So, I will get principal amountt lenderest eamed = 12.000 + 26,400 = 38,400 Aus 02 Future Value - $5,00.000 Discount vode, i = 8%. Years, n = 25 years 0. Present value, P.V= F.V. از - apvs 5,00,000 (1.0825 a PV = 730,089.52