Question: If you won the lottery and had the choice of
If you won the lottery and had the choice of the lump-sum payoff or the annuity payoff, what factors would you consider besides the implied interest rate (indifference interest rate) in selecting the payoff style?
Answer to relevant QuestionsGiven the following cash inflow at the end of each year, what is the future value of this cash flow at 6%, 9%, and 15% interest rates at the end of the seventh year?Year 1 ...... $15,000Year 2 ...... $20,000Year 3 ...... ...Given the following cash inflow, what is the present value of this cash flow at 5%, 10%, and 25% discount rates? Year 1: ..... $3,000Year 2: ..... $5,000Years 3 through 7: . $0Year 8: .... $25,000The Canadian Government has once again decided to issue a consol (a bond with a never-ending interest payment and no maturity date). The bond will pay $50 in interest each year (at the end of the year) but never return the ...Fill in the missing annual interest rates in the following table for an annuity-duestream.Jane Bryant has just purchased some equipment for her beauty salon. She plans to pay the following amounts at the end of the next five years: $8,250, $8,500, $8,750, $9,000, and $10,500. If she uses a discount rate of 10 ...
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