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Been stuck on these two. CAN SOMEONE EXPLAIN THESE TWO? 1. (2 points) Assume that you will receive $1,000 today. In addition, you will receive
Been stuck on these two. CAN SOMEONE EXPLAIN THESE TWO?
1. (2 points) Assume that you will receive $1,000 today. In addition, you will receive $2,000 a year in Years 1 through 5, $3,000 a year in Years 6 through 8, and $4,000 in Year 9, with all these cash flows to be received at the end of the year. If you require a 12 percent rate of return, what is the value of these cash flows today (rounded up to the nearest dollar)? a. $24,000 b. $14,250 c. $12,714 d. $16,129 e. None of the above 2. (2 points) Suppose you have just won the lottery and must choose one of the following (guaranteed) payoffs. The interest rate is 6%; ignore tax consequences. Which payoff has the highest value? a. $98,000 paid today b. $130,000 paid five years from today c. $50,000 paid two years from today and $70,000 paid five years from today d. $13,000 paid per year for ten years, with the first payment at the end of the first year e. No difference between the above four payoff optionsStep by Step Solution
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