Question

Shelley wants to cash in her winning lottery ticket. She can either receive eight $100,000 semiannual payments starting today, or she can receive a single-amount payment today based on a 6% annual interest rate. What is the single-amount payment she can receive today?

Answer 1

Answer:

single-amount payment $925,160

Explanation:

Given data:

Amount $100,000

Rate 6%

interest semi annually 3%

Number of period 5

Lumpsum Payment $= A\times {PVAF@ I,n}$

                                $= A\times {PVAF@ 3\%,5}$

calculation for PVAF

PVAF @ I,N $=\frac{(1-(1+I)^-N)}{I}$

[email protected] 3%,5 $= \frac{(1-(1+0.03)^{-5})}{0.03}$

                          =4.58

                   

Lumpsum Payment =202000*4.58

                               =925160