Bill has won a $1,000,000 lottery prize. The lottery has offered Bill a few options in how he can receive his prize.

1.Receivethe $1,000,000today.

OR

2.An annuity of $23,900paid Quarterly for 13 years.

While option #1 this sound nice, Bill has not had a good relationship with money in the past and he is torn between the twooptions. So to break the tie he wants to know which option will have the highest future value after 13 years.

Assume a rate of 5.6% compounded Bi-Weekly for all the following questions.

Part 1

What is the Future Value of Option 1?

Part 2

What is the Future Value of Option 2?

Part 3

Quarterly wants to have $192,306.64 after 11.5 years. How much would the annuity need to be inorder to get this number?

(Solve for PMT)

Sherri had been hurt in a car accident. The insurance company has offered her two options and she has come to you to help her make the decision regarding the offer. The first option was to get a lump sum in the amount of $23,808.39 or she can receive an annuity of $210Monthly for the next 11.25 years. If she could invest the money she can earn 3.2% compounded Semi-Annually.

What is the Present value of the Annuity?

Which do you choose?

Lump Sum is Better

Annuity is Better

They are Equal

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What is the Present value of the Annuity if the payments were at the beginning of the month?

Max is looking to buy a new car. In particular, he is looking to buy a Audi SUV. Max really wants to know is what the Monthly payments would be for a financing or a leasing option on the vehicle. The interest rate for financing is 3% and for leasing is 3.7% both are compounded Monthly.

Max is able to negotiate a price of $52,500 for the vehicle.

If Max were to finance the vehicle for 84months;what would the Monthly payments be?

What would the length of the financing be inMONTHSif the Monthly payments was $748.53 and Paid at theBeginningof the period?

What would the Monthly lease payments be if the Audi SUVhas a residual(FV) of 25,800 for a 4 year lease? (Make sure to use correct rate)