Math

posted by .

The winner of a popular lottery is offered one of two options:
i) a lump sum of $102 500
ii) $1000 every month for 10 years
If the money can be invested at 3.0% p/a, compounded monthly, which option should the winner choose? Justify your reasoning.

Every three months, Carlos deposits $400 in an account bearing 5.6% p/a, compounded quarterly. After 5 years, Carlos stops making regular deposits, but leaves the money in the account for another 2 years. How much money is in the account at the end of the 7 years?

  • Math -

    first one:

    find present value of second option ...
    i = .03/12 = .0025
    n = 120

    PV = 1000( 1 - 1.025^-120)/.0025
    = 103 561.75

    So what do you think?

    second one:

    i = .056/4 = .01625
    in 5 yrs, n = 20

    amount after 5 years = 400(1.01625^20 - 1)/.01625
    = 9364.179

    invest that for 2 more years ----->
    9364.179(1.01625)^8 = 10 653.06

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. Mathematics

    Suppose an employee of a company is retiring and has the choice of two benefit options under the company pension plan. Option A consists of a guaranteed payment of $1,575,000 at the end of each month for 10 years. Altematively, under …
  2. math

    Suppose an employee of a company is retiring and has the choice of two benefit options under the company pension plan. Option A consists of a guaranteed payment of $1,575 at the end of each month for 10 years. Alternatively, under …
  3. math

    6. A lottery offers two options for the prize. Option A: $1000 a week for life Option B: $ 600 000 in one lump sum. The current expected rate of return for large investment is 7%/a, compounded weekly. a. Which option would the winner …
  4. math

    6. A lottery offers two options for the prize. Option A: $1000 a week for life Option B: $ 600 000 in one lump sum. The current expected rate of return for large investment is 7%/a, compounded weekly. a. Which option would the winner …
  5. Finance

    a client comes to you for an investment advice on his 500,000 winnings from the lottery. he has been offered the following options. what would be the best option 6% compounded interest quarterly for 5 years or 8% compounded annually …
  6. math/ compounded

    Scenario: A client comes to you for investment advice on his $500,000 winnings from the lottery. He has been offered the following options by three different financial institutions and requests assistance to help understand which option …
  7. math

    A client comes to you for investment advice on his $500,000 winnings from the lottery. He has been offered the following options by three different financial institutions and requests assistance to help understand which option would …
  8. math

    A client comes to you for investment advice on his $500,000 winnings from the lottery. He has been offered the following options by three different financial institutions and requests assistance to help understand which option would …
  9. Investment interest

    Scenario: A client comes to you for investment advice on his $500,000 winnings from the lottery. He has been offered the following options by three different financial institutions and requests assistance to help understand which option …
  10. Consumer Math

    On retirement Victor was offered the option of receiving monthly payment of $1674.08 or a lump-sum payment of $150667 a) What are the respective incomes per annum of each option if the lump sum can be invested at 11.5% p.a. b) At what …

More Similar Questions