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Category > Business & Finance Posted 05 Aug 2017 My Price 12.00

Céline has just won a lottery.

Céline has just won a lottery. She will receive a payment of $6,000 each year for nine years. As an alternative, she can choose an immediate payment of $50,000.

A. Which alternative should she pick if the interest rate is 5 percent?

B. What would the interest rate have to be for Céline to be indifferent about the two alternatives?

C. The lottery offers a third alternative for lottery prize payments: Céline can opt to receive annual payments of $3,000 per year for the rest of her life. Should Céline choose this option to the $50,000 lump sum payment today, if the interest rate is 5 percent per year?

 

Topics: Ordinary Annuities, Determining Rates of Return, Perpetuities

Level of difficulty: Difficult

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Status NEW Posted 05 Aug 2017 06:08 PM My Price 12.00

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