he lottery commission is offering the winner of a recent jackpot a payout of 15 yearly payments $209,000 with the first payment occurring one year from today. As an alternative, the commission would also like to offer the winner (and their heirs) a series of yearly payments every year in perpetuity, again with the first payment occurring one year from today. If the commission uses a discount rate of 5%, what payment should the commission offer in the second option in order to make the two options equivalent in present value terms? Enter your answer as a positive number and round to the nearest dollar.
he lottery commission is offering the winner of a recent jackpot a payout of 15 yearly payments $209,000 with the first payment occurring one year from today. As an alternative, the commission would also like to offer the winner (and their heirs) a series of yearly payments every year in perpetuity, again with the first payment occurring one year from today. If the commission uses a discount rate of 5%, what payment should the commission offer in the second option in order to make the two options equivalent in present value terms? Enter your answer as a positive number and round to the nearest dollar.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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The lottery commission is offering the winner of a recent jackpot a payout of 15 yearly payments $209,000 with the first payment occurring one year from today. As an alternative, the commission would also like to offer the winner (and their heirs) a series of yearly payments every year in perpetuity, again with the first payment occurring one year from today. If the commission uses a discount rate of 5%, what payment should the commission offer in the second option in order to make the two options equivalent in present value terms? Enter your answer as a positive number and round to the nearest dollar.
Transcribed Image Text:The lottery commission is offering the winner of a recent jackpot a payout of 15 yearly payments $209,000 with the first payment occurring one year from
today. As an alternative, the commission would also like to offer the winner (and their heirs) a series of yearly payments every year in perpetuity, again with
the first payment occurring one year from today. If the commission uses a discount rate of 5%, what payment should the commission offer in the second
option in order to make the two options equivalent in present value terms? Enter your answer as a positive number and round to the nearest dollar.
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