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you recently won a lottery and have the option of receiving one of the following three prizes: (1) $86,000 cash immediately, (2) $32,000 cash immediately and a six-year annual annuity of $9,200 beginning one year from today, or (3) a six-year annual annuity of $17,400 beginning one year from today. assuming an interest rate of 6% compounded annually, determine the present value for the above options. which option should you choose?

Respuesta :

The amount a lender charges a borrower in interest is known as the interest rate, and it is represented in terms of the principal, or the amount borrowed

enter all of the values into the formula

A) i= 0.06

i) PV= 86,000

ii) First, we need to calculate the final value of the annuity:

FV= {A*[(1+i)^n-1]}/i

A= annual pay

FV= {9,200*[(1.06^6)-1]}/0.06 + [(9,200*1.06^6)-9,200]= 68,023.31

PV= FV/(1+i)^n= 68,023.31/1.06^6= 47,953.75 + 32,000= $79,953.75

ii) FV= {17,400*[(1.06^6)-1]}/0.06 + [(17,400*1.06^6)-17,400]= 128,652.77

PV= 128,652.77/1.06^6

= $90,695.13

Assuming an interest rate of 6%, determine the PV value for the above options.

The answers are:

$90,695.13

Learn more about Interest here:

brainly.com/question/13324776

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