Gabrielle just won $2.5 million in the state lottery. She is given the option of receiving a total of $1.3 million now,...
Gabrielle just won $2.5 million in the state lottery. She is given the option of receiving a total of $1.3 million now, or she can elect to be paid $100,000 at the end of each of the next 25 years. If Gabrielle can earn 5% annually on her investments, from a strict economic point of view which option should she take and what formula to use?
Homework Answers
PV of first option =1300000
PV of second =PMT*((1-(1+r)^-n)/r) =100000*((1-(1+5%)^-25)/5%)
=1409394.46
Hence PV of second option is higher hence second option should be
chosen
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Gabrielle just won $2.5 million in the state lottery. She is given the option of receiving a total of $1.3 million now,...
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Gabrielle just won $2.75 million in the state lottery. She is given the option of receiving a total of $1,400,000 now, or she can elect to be paid $110,000 at the end of each of the next 25 years. If Gabrielle can earn 5% annually on her investments, from a strict economic point of view which option should she take?
Gabrielle just won $2.75 million in the state lottery. She is given the option of receiving...
Gabrielle just won $2.75 million in the state lottery. She is given the option of receiving a total of $1,400,000 now, or she can elect to be paid $110,000 at the end of each of the next 25 years. If Gabrielle can earn 5% annually on her investments, from a strict economic point of view which option should she take? If Gabrielle takes the prize as an annuity, the present value of the 30-year ordinary annuity is $ . (Round...
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