Problem 6 (13 marks) The Warren Buffett NCAA March Madness Bracket Challenge is an annual contest...

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Problem 6 (13 marks) The Warren Buffett NCAA March Madness Bracket Challenge is an annual contest that awards any Berkshire Hathaway employee who can pick every first and second round game correctly $1 million a year for life. You just celebrated your 45th birthday and you expect to live until the age of 85. a) If you won, and can invest each year's winnings at 5% compounded quarterly, what is the value of the prize today? (5 marks) b) If you wanted to establish a scholarship when you die that would provide annual scholarships totaling $100,000 paid at the end of each year and growing at 4% per year, how much would you have to invest each month if you could still earn 5% compounded quarterly? (8 marks) Problem 6 (13 marks) The Warren Buffett NCAA March Madness Bracket Challenge is an annual contest that awards any Berkshire Hathaway employee who can pick every first and second round game correctly $1 million a year for life. You just celebrated your 45th birthday and you expect to live until the age of 85. a) If you won, and can invest each year's winnings at 5% compounded quarterly, what is the value of the prize today? (5 marks) b) If you wanted to establish a scholarship when you die that would provide annual scholarships totaling $100,000 paid at the end of each year and growing at 4% per year, how much would you have to invest each month if you could still earn 5% compounded quarterly? (8 marks)

Answer rating: 100% (QA)

Problem 6 Solution a To calculate the present value of the prize today we need to determine the valu... View the full answer