1. A $1,000,000 lottery prize pays $50,000 per year for the next 20 years. If the current rate of return is 4.5%, what is the present value of this prize?
2. An insurance policy offers you the option of being paid $750 per month for 20 years or a lump sum of $50,000. Which has the greater value if the current rate of return is 4.5% compounded monthly and you expect to live for 20 years?
3. Use the bond yield calculator to determine the yield of a bond that has 5 years to maturity (therefore ten semesters to go), has a coupon interest of 6% and a market price of $102.5.