Question
Jack and Diane are lottery winners. They hold the ticket to the Grand Prize in the Set for Life Prize that makes 20 consecutive annual
Jack and Diane are lottery winners. They hold the ticket to the Grand Prize in the Set for Life Prize that makes 20 consecutive annual payments of $50,000 starting immediately. There is one hitch: the eleventh payment (to be received at the end of year 10) is not $50,000 but only $20,000 (that is, this payment is $30,000 LESS than the other 20). Which of the following comes closest to the present value of the prize if interest rates are 3%?
| 1. | $ 635,849 | |
| 2. | $ 686,430 | |
| 3. | $ 591,154 | |
| 4. | $ 743,867 | |
| 5. | $ 551,529 |
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Finance And Economics Discussion Series Errors In The Measurement Of The Output Gap And The Design Of Monetary Policy
Authors: United States Federal Reserve Board, Athanasios Orphanides
1st Edition
1288717849, 9781288717842
