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Calculate the amount you should accept

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Reference no: EM133160598

Question - You might have noticed the below advertisement, where the lottery winner will receive $20,000 (twenty thousand dollars) every month for the next twenty years.

i) Suppose you win this lottery and have an option to receive a lump-sum amount today. Calculate the amount you should accept, knowing that a discount rate of 4 per cent is applicable.

ii) Suppose you decide to invest $5,000 every month in a global large-cap index fund, which has historically given its investors an annual return of 8 per cent. Calculate the lump sum amount you expect to receive after twenty years when the cash flow from your win stops.

Reference no: EM133160598

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