Question

Shelley wants to cash in her winning lottery ticket. She can either receive sixteen $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?
a. $878,611

b. $744,090

c. $853,020

d. $801,969

Answer 1

Answer:

$1,256,000

Explanation:

Data provided in the question:

Number of semiannual payments received = 16

Amount of each payment = $100,000

Annual interest rate = 6%

Thus,

Semiannual interest rate = $\frac{6\%}{2}$ = 3% = 0.03

Now,

Payment = Amount × $\frac{(1-(1+i)^{-n})}{i}$

or

Payment = $100,000 × $\frac{(1-(1+0.03)^{-16})}{0.03}$

Payment = $100,000 × 12.56

or

Payment = $1,256,000

Answer 2

Answer:

$878.611

Explanation:

just answered it