What rate of return is built into the annuity
Course:- Financial Management
Reference No.:- EM13942930

Assignment Help
Assignment Help >> Financial Management

Suppose you just won the state lottery, and you have a choice between receiving $2,075,000 today or a 15-year annuity of $300,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes.

1. 13.26%

2. 10.38%

3. 12.14%

4. 11.71%

5. 9.44%

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Financial Management) Materials
A U.S. bank has made £50 million in Britain and has £40 in deposits. The bank's currency trading desk has also contracted to buy £20 million and has short positions of £15 mil
The spread between the yield on a 3-year corporate bond and the yield on a similar riskfree bond is 50 basis points. The recovery rate is 30%. Estimate the average hazard ra
Suppose that a local restaurant is trying to evaluate the value of adding a food truck to their business. The restaurant is financed with a bank loan (debt) at 9.00% per year,
Yield to maturity A firm's bonds have a maturity of 12 years with a $1,000 face value, have an 11% semiannual coupon, are callable in 6 years at $1,214, and currently sell at
Assume the total cost of a college education will be $415,000 when your child enters college in 18 years. You presently have $69,000 to invest. What annual rate of interest mu
Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 5% coupon paid annually and warrants attached. These bonds are currently trading for $1,000. Neubert
Scanlin, Inc., is considering a project that will result in initial after tax cash savings of $1.86 million at the end of the first year, and these savings will grow at a rate
Consider a levered firm’s projects that have similar risks to the firm as a whole. Is the discount rate for the projects higher or lower than the rate computed using the secur