A $1,000,000 lottery prize pays $50,000 per year for the next 20 years. If the current rate of return is 4.5%, what is the present value of this prize?An insurance policy offers you the option of being paid $750 per month for 20 years or a lump sum of $50,000. Which has the greater value if the current rate of return is 4.5% compounded monthly and you expect to live for at least 20 years?A bond issued by Live Nation is currently trading at $89.50, pays a coupon rate of 5.625%, and matures in 12 semesters. Using the bond yield calculator, what is its yield to maturity?

Present Value: The method to compute the present value is to discount the lump sum amount or the…

Answered: A $1,000,000 lottery prize pays $50,000…

A $1,000,000 lottery prize pays $50,000 per year for the next 20 years. If the current rate of return is 4.5%, what is the present value of this prize?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 6MC: You want to invest $8,000 at an annual Interest rate of 8% that compounds annually for 12 years....

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Question

A $1,000,000 lottery prize pays $50,000 per year for the next 20 years. If the current rate of return is 4.5%, what is the present value of this prize?
An insurance policy offers you the option of being paid $750 per month for 20 years or a lump sum of $50,000. Which has the greater value if the current rate of return is 4.5% compounded monthly and you expect to live for at least 20 years?
A bond issued by Live Nation is currently trading at $89.50, pays a coupon rate of 5.625%, and matures in 12 semesters. Using the bond yield calculator, what is its yield to maturity?

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