Business, 03.04.2020 21:32 perlamaria01

A lottery claims its grand prize is $15 million, payable over 5 years at $3000000 per year. If the first payment is made immediately, what is the grand prize really worth? Use an interest rate of 8%.

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Answer from: aatharris21

$ 11, 978,133.75

Explanation:

The grand prize of 15,000,000 is worth the present value of the prize at an 8% interest. The prize is paid every year, meaning its an annuity case.

The present value of an annuity is calculated using the formula

PV = P × 1 − (1+r)−n

Where

P $3,000,000

r is 8% 0r 0.08

n is 5

PV = $3,000,000 x 1-(1+0.08) - 5

0.08

PV =$3,000,000 x 1 - 0. 6805831

0.08

PV = $ 3,000, 000 x 3.99271

PV = 11, 978,133.75

Answer from: Quest

of the three mortgage options that demarco and tanya have to choose from, the balloon payment mortgage would be their best option, over adjustable payment and fixed payment plans.ultimately, the balloon payment plan would save demarco and tanya overall, in interest, would cost less monthly, and they would only have to make these payments for 8 years, opposing to 30 years for adjustable or fixed payment plans.

overall, demarco and tanya would save $80,811 if they chose balloon payments over fixed payments, and would save $116,711 if they choose balloon payments over adjustable payments. benefits with choosing fixed payments over adjustable payments is that, in the end, the payments will still be $836.30 a month, while with adjustable payments, the initial monthly payments will be $763.38 to $1082.70 a month, ultimately leading to a more costly purchase. benefits with choosing fixed payments over balloon payments are not present. benefits in choosing adjustable payments over is that it has a lower interest rate, and starts with lower monthly payments initially. benefits in choosing adjustable payments over balloon payments include a lower interest rate, and lower initial monthly payments. benefits in choosing balloon payments over fixed payments include lower interest rates, lower overall price, lower monthly payments, takes less time to pay off, and does not require a downpayment. benefits in choosing balloon payments over adjustable payments include, lower monthly payments (when averaged), takes less time to pay off, and lower overall price.

hence, option c, balloon payments, is the best option for demarco and tanya to make this purchase, for it will save them a minimum of $80811, and a maximum of $116,711.

Answer from: Quest

Answerless than average total cost, regardless of whether marginal cost is rising or falling;

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A lottery claims its grand prize is $15 million, payable over 5 years at $3000000 per year. If the f...

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