posted by Anne on .
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?
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!
What is the expected return on a portfolio consisting of an equal amount invested in each stock?
Stock Expected return
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?