You have a choice between a lottery lump sum payout of $10,000,000 today or a series of twenty-five annual annuity payments (first payment one year from today)

At a discount rate of 6.50%, how large must the annual annuity payments be to make you indifferent between the two choices?
A) $819,814.81
B) $873,102.77
C) $769,779.17
D) $400,000.00


Answer: A
Explanation: A)
PMT = PV / = $10,000,000/ = $819,814.81.
MODE = END
INPUT 25 6.5 10,000,000 ? 0
KEY N I/Y PV PMT FV
CPT 819,814.81

Business

You might also like to view...

Most business plans include three types of financial statements

Indicate whether the statement is true or false

Business

A(n) ________ is property that a debtor acquires post the execution of a security agreement

A) floating lien B) after-acquired property C) attachment D) future advance

Business

If the internal rate of return (IRR) of an investment is lower than the hurdle rate, the project should be rejected.

Answer the following statement true (T) or false (F)

Business

When sending a text message:

a. remember that text messages are not private. b. include as much information as possible. c. always text during a business meeting. d. expect an immediate response.

Business