A B E F 1 Part 1: You have just won the state lottery and have two choices for collecting your winnings. You can collect 2 $2,000,000 (Option 1) today or receive $250,000 (Option 2) per year for the next eight years. A financial analyst 3 has told you that you can earn 4% on your investments. Which option would you choose? 4 5 N (period of time) 6 (Interest) 7 PV (Present Value 8 FV (Future Value) 9 PMT (Annuity) 10 11 12 Part II: You have decided that you would like to buy a house in 5 years and will need a down payment of $25,000. How much do you need to save each year if your savings account 13 returns an interest rate of 3%. 14 15 N(period of time) 16 (Interest) 17 PV (Present Value 18 FV (Future Value) 19 PMT (Annuity) 20 21 22 Part III: You are 25 years old and decide to contribute the maximum allowable amount to your 401k each year = $19,500. If your 401k earns 5% each year, what will your balance be 23 when you turn 60 years old? 24 25 N (period of time) 26 (Interest) 27 PV (Present Value 28 FV (Future Value) 29 PMT (Annuity) 30