Week 4 DQ #1 Corp Fin (Time Value of Money) Options Menu:

Forum Most state lotteries in the U.S. give Lottery winners of particularly large prizes the option of taking the total prize as an annuity over several years, usually 10-20, or as a discounted lump sum now. Based on what we are studying this week and your prior knowledge and research, what are the various factors that should be considered in choosing either alternative if the goal is to maximize the total benefit to the Lottery winner? What are the risks associated with each alternative? The text presents a mathematical relationship between present value and future value. What does this relationship suggest to potential investors as far as setting important priorities? What is the most important determinant of meeting retirement goals?

DQ #2Corp Fin

(Time Value of Money)

Discounted Cash Flow Valuation) Options Menu: Forum Starting with last week's introduction to valuation and continuing with this week's topic on discounted cash flow valuation, we learned that one of the key variables in determining the value of any cash flow is the interest rate (sometimes referred to as discount rate). However, interest rates may be quoted in more than one way. What do the terms EAR and APR mean? What are the main differences between the two? Under what circumstances could they be similar or vary greatly for the same investment? The text presents several different categories of loans, including pure discount loans, interest-only loans, amortized loans, and balloon loans. What do each of those categories mean and please provide a real-life example of when each could be an appropriate method of financing.

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