User Account

All Pages

Annual interest on investments

Assignment Help Finance Basics
Reference no: EM132042346

In 2016 A Pevely man won the Missouri lottery and was given the choice of receiving $6.8 million in cash immediately, or 25 annual payments of $400,000 each (also beginning today). At what interest rate would he be indifferent between the two options? Suppose he believes he could earn 6% annually on his investments. Which option should he take?

Question 5b) Suppose he could earn 6% annual interest on his investments. Which options should he take?

Lump Sum Calculation

1. Clear All (Orange Button, C/C All)

2. 6,800,000 PV (Present Value) button

3. 6.0 I/YR (Interest/ Year) button

4. 25 N (Number of Years) button

5. 0 PMT (Payment Amount button

6. Press FV for Future Value calculation

Lump Sum Future Value = 29,184,720.89

Annuity Payment Calculation

1. Clear All (Orange Button, C/C All)

2. 0 PV (Present Value) button

3. 6.0 I/YR (Interest/ Year) button

4. 25 N (Number of Years) button

5. 400,000 PMT (Payment Amount button

6. Press FV for Future Value calculation

Annuity Payment Future Value = 21,945,804.80

He should choose the Lump Sum Payment

Reference no: EM132042346

Questions Cloud

What is the system capacity : What is the system capacity, and which is the bottleneck department? How much slack (unused capacity) is available in other departments?
Find the present value of the bond : Hint, to find the present value of the bond, you do not need to make the e x adjustment, simple discount at the risk free rate.
Behaving rationally on the decision to exercise the option : Suppose you believe that Du Pont's stock price is going to decline from its current level of $ 83.56 sometime during the next 5 months.
What is the highest net profit possible : At the time of the purchase, the spot rate of the pound is $1.38 and rises to $1.45 by the expiration date. What is the highest net profit possible?
Annual interest on investments : Suppose he could earn 6% annual interest on his investments. Which options should he take?
Develop proposed improvements to theory : Develop proposed improvements to theory and practice in software management. Apply project management techniques to manage resources and issues in software.
Cash coverage of outstanding debt : Should they be higher given the reduced cash coverage of outstanding debt?
What is gross debt service ratio : Property taxes on the house are expected to be $1200 per year. What is her gross debt service ratio?
What is the npv of the project in us dollars : In addition, the subsidiary can be sold at the end of three years for an estimated €9,150,000. What is the NPV of the project in U.S. dollars?

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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