You just won the grand prize in the Super Pokemon Lotto and won 12 million pokecoins! (Current foreign exchange rate is 1 pokecoin = 1 US dollar). You will get paid 100,000 pokecoins per month for the next 10 years (120 months, get it?).

But you're a bit uneasy - what if Pokemon isn't even around 10 years from now and they go bust, then maybe your future payments are at risk - so you want to ask for a up-front lump sum amount instead of the monthly amounts spread over ten years. The Lotto organizers may be willing to give you that one-time all cash lump-sum payout right now. But how much should you ask then? (If you ask for 12 million pokecoins as the immediate lump-sum, of course they will toss you out as someone who never even took FIN 302 so you won't ask for that obviously).

1. What lump-sum amount do you ask for and why? Explain the logic behind your calculation. If the Lotto organizers don't follow your logic, they will reject you. Explain and discuss EACH component.

Answer rating: 100% (QA)

To calculate the lump sum amount you should ask for instead of receiving 100000 pokecoins per month ... View the full answer