Question

Karen has won $50,000 from a lawsuit. The money will be paid out in 8 equal-sized annual payments (payments are made at the end of each year). If Karen invests each payment in an account that earns 4.6% interest, compounded annually, how much will she have at the end of 8 years? Preview After Karen wins her lawsuit, she is approached by a structured settlement company. They offer her $48,500, paid immediately, in return for her annual lawsuit payments. How much will $48,500 be worth in 8 years if Karen invests it at 4.6% interest, compounded annually? Preview Based on the these calculations, should Karen accept the settlement company's offer? No Yes Edgar just won the lottery. He is given an choice of two options. He can take S315000 right now or he can take S450000 five years from now. Assuming that Edgar is going to invest the lump sum and can earn 5.2% compounded monthly on his investment today, what should Edgar do? Should he take the lump sum of S315000 rght now or wait five years and take the pay out of $450000? Preview Find the future value of the lump sum five years from now: $ Preview How much interest would Edgar carn on the lump sum pay out of $315000 if he invested it for five years: S Which is the better investment and why? Edgar should take the lump sum now because it's future value in five years is worth more than the pay out is five years from now. Edgar should take the pay out five years from now because it will be worth more than the future value of the lump sum he would get now. Edgar should take the lump sum now because he'll earn interest on it during the next five years. What does the lump sum need to be in order for it to be worth the same amount today as the pay out Edgar will get in five years assuming that the same interest ruls Preview apply? S

Answer 1

Amount Invested $501000 3006 250 annually interest r-4.6% rate Amount earn on Mahrihy of e Year 6250 [d, o 46),17 A = 0 46 50 Lt, 43.3024 041-11 0 046 eth tecy A兰与58,835 7 at the end fer e tear For depos hng 48,50o chvestog company a4 | A' 69 502. OX Since the 2nd opthon (compant offer 48,500) has more earhi as compared to First ophon (eruaul eight payment) Hence, karen shoutd accept compant offer (Yes) w

Hope it helps you out.

In case any doubt please feel free to ask.

I will be happy to help you.

Thanks!!

Note: In case multiple questions, with subpart ,please upload them separately .