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ICE Princess25 [194]
3 years ago
10

Several years ago, The Wall Street Journal reported that the winner of the Massachusetts State Lottery prize had the misfortune

to be both bankrupt and in prison for fraud. The balance of the prize was $9,420,713, to be paid in 19 equal annual installments (There were 20 installments, but the winner had already received the first payment). The bankruptcy court judge ruled that the prize should be sold off to the highest bidder and the proceeds to be paid to the creditors. If the interest rate was 8%, how much would you have been prepared to bid for the prize
Business
1 answer:
lorasvet [3.4K]3 years ago
4 0

Answer:

the present value of the annuity = $4,523,638

Explanation:

this is an ordinary annuity:

annual payment = $9,420,713 / 20 = $471,035.65

number of periods = 19 periods

interest rate = 8%

therefore, the present value annuity factor = 9.6036

the present value of the annuity = $471,035.65 x 9.6036 = $4,523,637.97 ≈ $4,523,638

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8 0
3 years ago
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Suppose the U.S. yield curve is flat at 3% and the euro yield curve is flat at 5%. The current exchange rate is $1.4 per euro. W
Kruka [31]

Answer: hello your question is incomplete attached below is the complete question.

answer :

3.02 million,    2.96 million,    2.91 million

Explanation:

<u>Determine the swap rate over a 3-year period</u>

swap rate = forward exchange rate * exchange amount

For year 1

1.4 * ( 1 + 0.03 / 1 + 0.05 ) * 2.2 million

= 1.4 ( 0.98095 ) * 2.2

= 3.02 million

For year 2

1.4 * ( 1 + 0.03 / 1 + 0.05 )^2 * 2..2 million

= 1.4 ( 0.98095 )^2 * 2.2 million

= 2.96378 million

For year 3

1.4 * ( 1 + 0.03 / 1 + 0.05 )^3 * 2.2 million

= 1.4 ( 0.98095 )^3 * 2.2 million

= 2.90733 million  

3 0
2 years ago
Steven wants to become a member of the labor union. Which law giver him the right to do so?
ziro4ka [17]

Answer:

D. Wanger Act

Explanation:

3 0
3 years ago
Beck Company has inventory of​ $725,000 in its stores as of December 31. It also has two shipments in transit that left the​ sup
FrozenT [24]

Answer:

Total Inventory            $899,000

Explanation:

Inventory at hand            $725,000

Inventory in transit     $102,000

Inventory in consignation   $72,000

Total Inventory            $899,000

<u>Notice:</u>

<em> The first cargo </em>is under term FOB destination, which means the goods are still property of the seller, so are not part of Beck company's yet.

<em>While the second cargo</em> is fob shipping point, Beck assume possesion of the gods as soon as they enter the dock.

3 0
3 years ago
You are a financial advisor helping a young family create a college fund to provide for their daughter Mary’s education. Mary ju
stiv31 [10]

Answer:

a. Tuition and housing costs today = $65,000 per year

Inflation rate = 4%

Tuition and housing costs in 13 years = 65,000 * (1 + 0.04)^13

Tuition and housing costs in 13 years = $108,229.78

b. Amount to be in the savings account can be calculated using the present value of a growing annuity due formula

After tax rate of return = 10 * (1 - 0.3) = 7%, Growth rate = 4%, Number of year = 4

PV = P x (1 + r) * [1 - (1 + g)^n * (1 + r)^-n] / (r - g)

PV = 108,229.78 * (1 + 0.07) * [1 - (1 + 0.04)^4 * (1 + 0.07)^-4] / (0.07 - 0.04)

PV = $415,050.16

c. Amount of the first payment can be calculated using FV of a growing annuity

FV = $415,050.16, Number of years = 13, Growth rate = 2%, Rate of return = 10%

FV = P * [(1 + r)^n - (1 + g)^n] / (r - g)

415,050.16 = P * [(1 + 0.07)^13 - (1 + 0.02)^13] / (0.07 - 0.02)

P = $18,591.47

d. If the investments are tax free, the rate of return = 10%

Amount to be in the savings account = PV = P * (1 + r) * [1 - (1 + g)^n * (1 + r)^-n] / (r - g)

= 108,229.78 * (1 + 0.1) * [1 - (1 + 0.04)^4 * (1 + 0.1)^-4] / (0.1 - 0.04)

= $398,768.92

FV = P * [(1 + r)^n - (1 + g)^n] / (r - g)

398,768.92 = P * [(1 + 0.1)^13 - (1 + 0.02)^13] / (0.1 - 0.02)

P = $14,778.36

7 0
3 years ago
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