• You just won a prize of $10,000 at the local Great Ideas show. You can receive the money all up front (t=0), or get a series of monthly payments as described below. In both cases, your discount rate is 5% APR. (Assume all compounding is annual.) You may choose to get 38 monthly payments, with the first payment starting 5 months from now. Using an annuity formula, calculate the monthly payment that makes you indifferent between receiving the $10,000 all up front or in monthly installments as described above. This formula (not a typed number) should appear in Box 1 on the spreadsheet and give the monthly payment amount. You must check this result by completing the table and summing all the present values of this monthly amount in Sum Column 1; the total of the values in this Column should equal $10,000.
• Across town, your friend has entered a similar contest, but the prize money payout schedule is already set: $270 today (immediately), followed by 41 monthly payments that grow this original payout at 3% APR. Your friends discount rate is 7% APR. (Assume all compounding is annual). What NPV does your friend receive from the prize? To do this, you must add the first $270 payment to the PV of all 41 of the future payments, determined by using a growing annuity formula. This formula (not a typed number) should appear in Box 2 on the spreadsheet. You must check this result by completing the table and summing all the present values of the 42 monthly amounts in Sum Column 2.

HW #1 Mini-Case: 100 points Your Name > HW #1 Mini-Case: 100 points Your Name >