a) Emma won a $10,000,000 state lottery. She has two (2) options. Option 1 allows her to
Question:
a) Emma won a $10,000,000 state lottery. She has two (2) options. Option 1 allows her to claim her money as 20 year payments of $2,000,000 each, and option 2 allows her to take $10,000,000 today. If the interest rate is 3%, which option should she take?
b) Jack is 30 years old and has decided to start saving for retirement. To achieve his financial goals, he plans to save $12,000 annually at the end of each year until he reaches age 65. If the account earns 4% per year, how much will he have in the account at age 65?
c) Find the present value and future value of an investment that pays 8% annually and makes the following end-of-year payments.
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
$1,000 $2,000 $4,000 $6,000 $9,000
d) Jane wants to endow an annual exhibition at the art gallery of her alma mater. She allocates $20,000 per year forever to this event. If the university earns 12% per year on its investments, and if the event is in one year's time, how much will she need to donate to endow the exhibition?
Future ValueFuture value (FV) is the value of a current asset at a future date based on an assumed rate of growth. The future value (FV) is important to investors and financial planners as they use it to estimate how much an investment made today will be worth...
Step by Step Answer:
Engineering Economic Analysis
ISBN: 9780195168075
9th Edition
Authors: Donald Newnan, Ted Eschanbach, Jerome Lavelle