Q4) A-B

Time value and discount rates Personal Finance Problem You just won a lottery that promises to pay you $1,300,000 exactly 10 years from today. A company approaches you today, offering cash in exchange for your winning tottery ticket. a. What would you sell your claim for if you can eam the following rates of return on similar-risk investments during the 10 -year period? Do the values you calculated represent the lowest price you'd be willing to accept or the highest acceptable price? (1) 8% (2) 11% (3) 14% b. Rework part a under the assumption that the $1,300,000 payment will be received in 20 rather than 10 years. c. On the basis of your findings in parts a and b, discuss the effect of both the size of the rate of return and the time until receipt of payment on the present value of a future sum Time value and discount rates Personal Finance Problem You just won a lottery that promises to pay you $1,300,000 exactly 10 years from today. A company approaches you today, offering cash in exchange for your winning tottery ticket. a. What would you sell your claim for if you can eam the following rates of return on similar-risk investments during the 10 -year period? Do the values you calculated represent the lowest price you'd be willing to accept or the highest acceptable price? (1) 8% (2) 11% (3) 14% b. Rework part a under the assumption that the $1,300,000 payment will be received in 20 rather than 10 years. c. On the basis of your findings in parts a and b, discuss the effect of both the size of the rate of return and the time until receipt of payment on the present value of a future sum