monsterduckgoose
03.03.2020 •
Business
5. Olivia Kelly has just won the Beawinner Lottery and can elect one of two options for her payments. She can either receive $500,000 today or she can receive three annual payments as follows: $100,000 at the end of the first year, $200,000 at the end of the second year, and $300,000 at the end of the third year. If she believes she can make an investment that will pay a 9% compounded annually interest rate, should she take the $500,000 or the three payments?
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Ответ:
It is better to receive the $500,000 now.
Explanation:
Giving the following information:
Option 1:
Receive $500,000 today.
Option 2:
Three annual payments of $100,000, $200,000 and $300,000 at the end of each year.
Annual interest of 9%.
There are two different ways of determining which option is the best. We can calculate the present value of the three payments and compare them to $500,000, or calculate the final value at an interest rate of 9% compounded annually.
Present value:
PV= FV/(1+i)^n
The present value of the second option:
PV= 300,000/1.09^3 + 200,000/1.09^2 + 100,000/1.09= $491,734.17
Final value:
FV= PV*(1+i)^n
Option 1:
FV= 500,000*(1.09)^3= $647,514.5
Option 2:
FV= 100,000*1.09^2 + 200,000*1.09 + 300,000= $636,810
In both ways, option 1 is better.
Ответ:
erm
Explanation:
The more supply, the less demand. The less supply, the more demand.