Answer each of the following independent questions.
1. Alex Meir recently won a lottery and has the option of receiving one of the following three prizes:
(1) $64,000 cash immediately,
(2) $20,000 cash immediately and a six-period annuity of $8,000 beginning one year from today, or
(3) A six-period annuity of $13,000 beginning one year from today.
Assuming an interest rate of 6%, which option should Alex choose?

2. The Weimer Corporation wants to accumulate a sum of money to repay certain debts due on December 31, 2020. Weimer will make annual deposits of $100,000 into a special bank account at the end of each of 10 years beginning December 31, 2011. Assuming that the bank account pays 7% interest compounded annually, what will be the fund balance after the last payment is made on December 31, 2020?

  • CreatedJune 24, 2013
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