Question

A lottery ticket states that you will receive $250 every year for the next ten years.
a. What is the value of the winning lottery ticket in present value if the discount rate is 6%, and it is an ordinary annuity?
b. What is the value of the winning lottery ticket in present value if the discount rate is 6%, and it is an annuity due?
c. What is the difference between the ordinary annuity and annuity due in parts (a) and (b)?
d. Verify that the difference in part (c) is the difference between the $250 first payment of the annuity due and the discounted final $250 payment of the ordinary annuity.



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  • CreatedMay 08, 2014
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