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stion 23 (8 points) 1. Prizes are often not worth as much as claimed. Place a value on a lottery prize of $1,000,000 which is
stion 23 (8 points) 1. Prizes are often not "worth" as much as claimed. Place a value on a lottery prize of $1,000,000 which is to be received in 10 equal payments over 10 years, that is, $100,000 per year, with the first payment beginning a year from today. Assume annual interest rate of 8% over the 10 years.(hint present value of an ordinary annuity) estion 24 (8 points) You have provided your client with a legal service worth $8,300. Your client offers you the following cash flows instead of paying $8,300 today. Should you accept his offer if your opportunity cost is 9 percent? Cash DELL F3 F4 F5 F6 F7 FB F9 F10 0 Il g P A * #m $ 4 % 5 & 7 0) 8 9 V E R T YU us D F G I J K . You have provided your client with a legal service worth $8,300. Your client offers you the following cash flows instead of paying $8,300 today. Should you accept his offer if your opportunity cost is 9 percent? Year Cash Flow 1 2,000 3,000 N 3 2,000 4 3,000 A DELL 1. You want to buy a Toyota Prius on your 27th birthday. You have priced these cars and found that they currently sell for $30,000. You believe that the price will increase to $36,000 in seven years when you are ready to buy. You can presently invest to earn 10 percent. If you just turned 20 years old, how much must you save at the end of each of the next 7 years to be able to purchase the Toyota Prius in 7 years? 5 Question 23 (8 points) 18 1. Prizes are often not "worth" as much as claimed. Place a value on a lottery prize of $1,000,000 which is to be received in 10 equal payments over 10 years, that is, $100,000 per year, with the first payment beginning a year from today. Assume annual interest rate of 8% over the 10 years.(hint: present value of an ordinary annuity)
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