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timama [110]
3 years ago
15

Suppose you win a small lottery and have the choice of two ways to be paid: You can accept the money in a lump sum or in a serie

s of payments over time. If you pick the lump sum, you get $2,850 today. If you pick payments over time, you get three payments: $1,000 today, $1,000 1 year from today, and $1,000 2 years from today. At an interest rate of 9% per year, the winner would be better off accepting the , since that choice has the greater present value. At an interest rate of 11% per year, the winner would be better off accepting , since it has the greater present value. Years after you win the lottery, a friend in another country calls to ask your advice. By wild coincidence, she has just won another lottery with the same payout schemes. She must make a quick decision about whether to collect her money under the lump sum or the payments over time. What is the best advice to give your friend? The lump sum is always better. The payments over time are always better. It will depend on the interest rate; advise her to get a calculator. None of these answers is good advice.
Business
1 answer:
Paraphin [41]3 years ago
5 0

Answer:

The correct answer would be option A, The lump sum is always better.

Explanation:

If I would have to give advice to my friend who is in the same situation as i was in some time back, I would recommend him to go for the Lump sum choice. This is because of the fact that the interest rate compounded in three years payment schedule will result in the less value of what I am getting today. Accepting the lump sum value in contrast with accepting the yearly payments on 9% interest rate would be better off because it has more value at present.

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Answer:

The correct answer is $12,060.

Explanation:

According to the scenario, the given data are as follows:

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So, June required raw material = 400 units × 5 pounds = 2000 pounds

For July required raw material = 410 units × 5 pounds × 20% = 410 pounds

So, required total raw material for June = 2000 pounds + 410 pounds - 400 pounds ( already in inventory)

= 2010 pounds

So, the total cost required for raw material in June = 2010 pounds × $6

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Every day, central banks lend money to private banks through auctions. The extraordinary thing about these new liquidity injections starring the European Central Bank or the US Federal Reserve is not so much the operation itself, as the situation in which they occur.

In this case, problems arise when, due to distrust, banks do not lend money to each other, operations that are common when the system is working properly.

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6 0
3 years ago
An investment, which is worth 26,800 dollars and has an expected return of 4.28 percent, is expected to pay fixed annual cash fl
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Answer:

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Explanation:

<em>The present value of a sum expected in the future is the worth today given an opportunity cost interest rate. In another words ,it is amount receivable today that would make the investor to be indifferent between the amount receivable today and the future sum.</em>

The present value of a lump sum can be worked out as follows:

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n- number of periods- 4

PV = 26,800 × (1.0428)^(-4)=22,663.69

PV =  $22,663.69

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