Choose among three reward options

Assignment Help Financial Management
Reference no: EM131305410

Kristina just won the lottery, and she must choose among three reward options. She can elect to receive a lump sum today of $62 million, to receive 10 end of year payments of $9.5 million, or to receive 30 end of year payments of $5.6 million.

a) If she thinks she can earn 7% annualy, which should she choose?

b) If she expects to earn 8% annualy, which is the best choice?

c) If she expects to earn 9% annualy, which option would you recommend?

Reference no: EM131305410

Questions Cloud

Why might the managers of firms have different goals : Why might the managers of firms have different goals than the investors who buy the firms bonds?- How does the existence of rating agencies reduce this conflict between investors and firm managers?
Would you expect the interest rates on the bonds : Would you expect the interest rates on these bonds to be higher or lower than the interest rates on comparable municipal bonds? Briefly explain.
What is the effect on the accounting equation : Financial Statement -  What is the par value per share in dollars after the split and Does the Carrying Value of the Bonds Payable and Premium increase or decrease over the life of the bonds - What is the effect on the accounting equation when Treasu..
Show the impact on the market for us treasury bonds : Use one graph to show the impact of this change in tax rates on the market for municipal bonds and another graph to show the impact on the market for U.S. Treasury bonds.
Choose among three reward options : Kristina just won the lottery, and she must choose among three reward options. She can elect to receive a lump sum today of $62 million, to receive 10 end of year payments of $9.5 million, or to receive 30 end of year payments of $5.6 million. If she..
Why is the demand curve downward sloping : In the loanable funds model, why is the demand curve downward sloping? Why is the supply curve upward sloping?
Define closed economy and small open economy : Define Closed economy, Small open economy,  Large open economy and  World real interest rate.
Determine the number of fatand carbohydrate : Determine the number of "FAT", "CARBOHYDRATE", and "PROTEIN" calories in the "Typical Weekly Diet".Once you have determined the fat, carbohydrate, and protein calories in these foods, determine which "HIGH FAT" foods could be "eliminated" or "excha..
Show impact of us budget deficit on world real interest rate : Use the loanable funds approach to show the impact of the U.S. budget deficit on the world real interest rate, holding all else constant.

Reviews

Write a Review

 

Financial Management Questions & Answers

  What is the cost of external equity

Messman Manufacturing will issue common stock to the public for $42.50. The expected dividend and growth in dividends are $2.12 per share and 5.80%, respectively. If the flotation cost is 8.95% of the issue's gross proceeds, what is the cost of exter..

  Bonds discount rate is lowered

Which one of the following will occur if a bond's discount rate is lowered?

  What rate of money growth mexican government try to achieve

If the quantity theory of money holds with a constant k, and if Mexican real output is growing 6 percent per year, what rate of money growth should the Mexican government try to achieve?

  A project will incur the cash flows

An initial cost of 1 million, an annual cost of 40,000 starting the end of year 4 and runing through the end of year 10, and a receipt of 200,000 at the end of the years 1thru3 and 5 thru 10. The MARR is 10%. Draw the cash flow diagram for this proje..

  Containing initial investment and all the costs and revenues

Seven years has passed since Samuel Adams Healthcare Center (SAHC) bought the machine to detect a certain heart condition. Their original machine is being retired, and they want to buy a new machine. Fill in the following table, containing the initia..

  Make the decision to buy the hybrid worthwhile

Hybrid cars are touted as green alternatives; however, the financial aspects of hybrid ownership are not as clear. Consider a hybrid model that has a list price of $5,500 (including tax consequences) more than a comparable car with a traditional gaso..

  Contributes every month into his portfolio

James makes $120,000 a year ($10,000 a month). He pays 30% in taxes and his living expenses are $5,000 a month. He wants to invest the remaining for 30 years at 5%. How much will his portfolio be after 30 years? NOTE that he contributes every month i..

  How do you trade to take advantage of the change in skew

Suppose the following data are given. The current price of XYZ stock is $38/share. XYZ does not pay a dividend. The (annualized) six-month interest rate is 4%. There are six-month call and put options on XYZ stock.

  What would they gain by switching over to the nyse

Why do you suppose that well-known companies such as Apple and Facebook prefer to have their shares traded on the NASDAQ rather than on one of the major listed exchanges, such as the NYSE (for which they'd easily meet all listing requirements)? What'..

  How many contracts do you buy or sell

Suppose you want to hedge a $510 million bond portfolio with a duration of 3.5 years using 10-year Treasury note futures with a duration of 5 years, a futures price of 106, and 6 months to expiration. The multiplier on Treasury note futures is $100,0..

  Shareholders equal rights in the event of triggering event

Clint Wade owns 70 percent of the stock of Knock-Down Inc., a demolition and gravel supply company. The remaining 30 percent of the stock is owned in equal shares by three of the key managers of the business. The agreement gives all the shareholders ..

  What is the after tax cost of debt for the company

DR Choi issues a bond that pays 12% coupon rate. Suppose the price of the bond market value is 1020 and 8 years left until maturity. Given 32% of tax bracket what is the after tax cost of debt for the company ? The longer the time to maturity is the ..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd