FIN250 Homework 3: TVM2 1. You have just won "$1 million" in the lottery. (It is not really $1 million as we will see.) You can choose to be paid as $40,000 each year for the next 25 years, or you have the option to take a one-time cash payout of $500,000 today instead. If the interest rate is 5%, which should you choose? (That is, which has the higher value? You must be comparing two things to answer this question.) 2. Ronald has saved $600,000 for retirement and plans to withdraw it in equal annual amounts over the next 15 years. If he earns 5% on his savings, how much can he withdraw each year? 3. You have just graduated, and you plan to save $5,000 each year for your retirement in 45 years. If you earn 8% on your investments, how much will you have at retirement? 4. What if you wait 10 years to start saving? (You plan to save $5,000 each year for 35 years and earn 8%.) How much will you have at retirement? 5. You have $25,000 in student loans. If you make monthly payments for 15 years at 6%, compounded monthly, how much will your monthly payments be?