5 Stars for solutions on this excel probelm! Must be done in excel. The lottery

Question

5 Stars for solutions on this excel probelm! Must be done in excel.

The lottery jackpot was worth $100 million! The Texas Lottery Commission is being very tricky and has decided to give Leslie an annual payment of $2 million the first year, $4 million the second year, $6 million the third year, and $8 million the fourth year. This pattern ($2 million, $4 million, $6 million, $8 million) will done a total of 5 times, making for a total of 20 payments equaling the $100 million. She can also choose to take a single lump sum payment of $50,000,000 ($50 million) today. The investment banker is offering Leslie an account that will yield 8% annual interest. No matter which option she chooses, she plans to save all her lottery money and invest it at least until the date she receives that 20th payment. Ignoring any (obvious) tax and other considerations, which is the better deal for Leslie?

Use the proper Excel function(s) to figure out the answer and attach your Excel spreadsheet.

Explanation / Answer

Option 1: FV at the end of 20th year=2*(1.08^19)+4*(1.08^18)+6*(1.08^17)+8*(1.08^16)+2*(1.08^15)+4*(1.08^14)+6*(1.08^13)+8*(1.08^12)+2*(1.08^11)+4*(1.08^10)+6*(1.08^9)+8*(1.08^8)+2*(1.08^7)+4*(1.08^6)+6*(1.08^5)+8*(1.08^4)+2*(1.08^3)+4*(1.08^2)+6*(1.08^1)+8*(1.08^0) 220.02 Option 2 : FV at the end of 20th year=50*(1.08^20) 233.05 Option:2 of taking a lump sum of 50m now is a better option as the FV at the end of 20th year is higher.

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