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Finance

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A state's lottery winner is promised $200,000 a year for 3 years(starting at the end of the first year). Interes rate is annually 7 percent on its fund.
How much is the present value of this lottery?

  • Finance - ,

    Year 1 = 200,000 plus .07% = 14,000

    Year 2 = 400,000 plus .07% = 28,000

    Year 3 = 600,000 plus .07% = 42,000

    When you say "the present value of this lottery" do you mean at the end of the 3rd year? If you mean NOW and he hasn't collected any money = 0!

    Sra

  • Finance - ,

    What is the expected return on a portfolio consisting of an equal amount invested in each stock?
    Stock Expected return
    A 15%
    B 10
    C 22
    D 14

    b. What is the expected return on the portfolio if 50 percent of the funds are invested in stock C, 30 percent in stock A, and 20 percent in stock D?

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