Question #1 (9 Marks)

Kay has just won a $1,000,000 lottery grand prize. However, he does not actually get $1,000,000 right now, and instead the lottery corporation offers him 5 different payment options, from which he can choose from, as seen in Part A to Part E below. Determine the value of each of these options today, assuming a 5% discount rate.

A. $1,000,000 in 20 years (1 mark)

B. $30,000 at the end of each of the next 20 years.

C. $19,000 today. with yearly payments increasing by 4% per year. A total of 20 payments received, and all payments at the beginning of the year. (2 Marks)

D. $30,000 at the end of the next 10 years, and $20,000 at the end of the following 10 years.

(2 Marks)

E. $24,000 per year forever, with the first $24.000 payment to be received in 6 years. (3

Marks)