Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You work for the state of Louisiana and your job is to determine how much money the state needs to invest to guarantee payments for

You work for the state of Louisiana and your job is to determine how much money the state needs to invest to guarantee payments for a new lottery game. The winner of the lottery game will receive an immediate payment of $5,000. The winner will then receive additional payments of $1,000 every month for the next 36 months (3 years). The last monthly payment will come exactly 3 years after the immediate payment. After these monthly payments, the winner will receive annual payments of $10,000 every year for 10 years (a total of 10 payments). The first annual payment will come exactly one year after the last monthly payment. You have determined that you can invest the state's money safely and earn a 3.6% rate of return (APR with monthly compounding) for the entire length of time that the winner will be receiving payouts. Based on this information, how much money do you need to invest today so that you will have exactly enough to make all the promised payments to the winner of this new lottery game?Money to invest today _________________________

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Institutions Management A Risk Management Approach

Authors: Anthony Saunders, Marcia Millon Cornett

9th edition

1259717771, 1259717772, 9781260048186, 1260048187, 978-1259717772

More Books

Students also viewed these Finance questions

Question

What is a residual plot?

Answered: 1 week ago