math ( Discrete Functions)

lottery offers two options for the prize. (7)

Option A: $1000 a week for life.

Option B: $600 000 in one lump sum.

If you choose Option B, you have the opportunity to place the winnings into an investment that also makes regular payments, at a rate of 3%/a, compounded monthly.

Which option would the winner choose if s/he expects to live for another 50 years?
At what point in time is Option A better than Option B?

  1. 👍 0
  2. 👎 0
  3. 👁 675
  1. I assume we have to ignore taxes, which would be a silly assumption, but anyway ....

    We have to compare $600,000 with the present value of the annuity

    PV of annuity = 1000( 1 - 1.0025^-600)/.0025
    = $310,580.71

    what would be your choice?

    1. 👍 0
    2. 👎 0

Respond to this Question

First Name

Your Response

Similar Questions

  1. Math

    Nouchi has two investment options. Option A offers 9% annual interest with a $5000.00 principal and contributions of $500 at the beginning of each month. Option B offers 8% annual interest with a $10,000.00 principal and

  2. statistic

    A lottery ticket has a grand prize of $28 million. The probability of winning the grand prize is .000000023. Based on the expected value of the lottery ticket, would you pay $1 for a ticket? Show your calculations and reasoning

  3. Probability

    A raffle offers a first prize of​ $1000, 2 second prizes of​ $300, and 20 third prizes of​ $10 each. If 15000 tickets are sold at 50cents ​each, find the expected winnings for a person buying 1 ticket.

  4. Algebra 1- Help please

    Belinda wants to invest $1000. The table below shows the value of her investment under two different options for three different years: Number of years 1 2 3 Option 1 (amount in dollars) 1100 1210 1331 Option 2 (amount in dollars)

  1. Math

    Nancy wants to receive the most return on a $50,000 investment. She has two options. Option 1 gives annual interest at 5% compounded yearly. Option 2 gives annual interest at 3.5% compounded monthly. Which option is better after 3

  2. Algebra 2

    Ahmad will rent a car for a day. The rental company offers two pricing options: Option A and Option B. For each pricing option, cost (in dollars) depends on miles driven, as shown below. Costindollars Milesdriven OptionA OptionB

  3. algerbra

    Belinda wants to invest $1000. The table below shows the value of her investment under two different options for two different years: Number of years 1 2 3 Option 1 (amount in dollars) 1300 1600 1900 Option 2 (amount in dollars)

  4. mathematics

    Nouchi has two investment options. Option A offers 9% annual interest with a $5000.00 principal and contributions of $500 at the beginning of each month. Option B offers 8% annual interest with a $10,000.00 principal and

  1. MATH @Damon @ms. Sue

    Belinda wants to invest $1000. The table below shows the value of her investment under two different options for three different years: Number of years 1 2 3 Option 1 (amount in dollars) 1100 1210 1331 Option 2 (amount in dollars)

  2. Statistics

    You buy a lottery ticket to a lottery that cost $10 per ticket. There are only 100 tickets available to be sold in this lottery. In this lottery there are one $500 prize, two $100 prizes, and four $25 prizes. Find your expected

  3. math

    A prize of $100, $200, $500, or $1000 will be randomly awarded to a game show contestant, with the probabilities of winning each prize shown in the table below. What is the expected value of the prize that will be awarded?

  4. math

    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 3%/a, compounded monthly. a.Which option would the winner

You can view more similar questions or ask a new question.