Question
You have just won the lottery and you can choose between the following payout options. The annual interest rate (EAR) is 12%. a) $200,000 right
You have just won the lottery and you can choose between the following payout options. The annual interest rate (EAR) is 12%.
a) $200,000 right now and $100,000 every two years starting 2 years from now and ending 16 years from now.
b) $120,000 a year for 20 years with the first payment one year from today.
c) 25 annual payments of $90,000 and a 26th payment of $599,000. The first payment is made right now, and the $599,000 payment is made two years after the last $90,000 payment.
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You will enter next year into a savings plan where $200 is deducted from your account at the end of each quarter starting on March 31, 2021 (first payment) to December 31, 2025 (last payment). If the account pays 6.6% APR with monthly compounding, how much money is in the account on December 31, 2025 after the last contribution?
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