Business, 26.03.2020 21:54 patrick171888

Value of an annuity versus a single amount Personal Finance Problem Assume that you just won the state lottery. Your prize can be taken either in the form of $40 comma 000 at the end of each of the next 25 years (that is, $1 comma 000 comma 000 over 25 years) or as a single amount of $500 comma 000 paid immediately. a. If you expect to be able to earn 5% annually on your investments over the next 25 years, ignoring taxes and other considerations, which alternative should you take? Why? b. Would your decision in part a change if you could earn 7% rather than 5% on your investments over the next 25 years? Why? c. On a strictly economic basis, at approximately what earnings rate would you be indifferent between the two plans?

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Value of an annuity versus a single amount Personal Finance Problem Assume that you just won the sta...

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