Question
1. what is the present value of an annual stream of ten $2,500 payments to you assuming an 8% discount rate? 2. you have won
1. what is the present value of an annual stream of ten $2,500 payments to you assuming an 8% discount rate?
2. you have won a $20,000 lottery jackpot. You can collect the money in payments of $1,000 each year for 20 years or receive a lump sum payment of $11,300 today. Assuming 6% discount rate which will you choose?
3. you deposit $5,000 in a retirement account at the end of each year for 20 years. Your investment earns 8% interest and gains each year. You decide to retire after working hard all those years. Can you retire comfortably? why or why not?
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