Question
Answer each of the following independent questions. Alex Meir recently won a lottery and has the option of receiving one of the following three prizes:
Answer each of the following independent questions. |
Alex Meir recently won a lottery and has the option of receiving one of the following three prizes: (1) $82,000 cash immediately, (2) $30,000 cash immediately and a six-period annuity of $9,000 beginning one year from today, or (3) a six-period annuity of $17,000 beginning one year from today. (FV of $1,PV of $1,FVA of $1,PVA of $1,FVAD of $1andPVAD of $1)(Use appropriate factor(s) from the tables provided.) |
1-a. | Assuming an interest rate of 7%, determine the PV value for the above options. |
1-b. | Which option should Alex choose? | |||
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2. | The Weimer Corporation wants to accumulate a sum of money to repay certain debts due on December 31, 2025. Weimer will make annual deposits of $160,000 into a special bank account at the end of each of 10 years beginning December 31, 2016. Assuming that the bank account pays 8% interest compounded annually, what will be the fund balance after the last payment is made on December 31, 2025? |
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