How much would you accept in lump sum today, in place of a lottery payment of $5

Question

How much would you accept in lump sum today, in place of a lottery payment of $50,000 at the end of each of 20 years. ($1.000,000 in total), assuming you could invest it at an 8% rate? What will be the value in 20 years of $5,000 contributed at the end of each year into an IRA (individual retirement account) which pays 8%? What should you be willing to pay today for a contract to receive $50,000 in 10 years assuming an 8% interest rate? How much will $100,000 invested in a 5-year 8% CD be worth at maturity? What rate of interest am I paying if my monthly payment is $400.00 on a $15,000 loan to be paid off in 4 years? How much will my annual payments be on a $5,000 loan at 12% interest, to be paid off in 4 years? How much will my monthly payments be on a $15,000 loan at 12% interest, to be paid off in 4 years? How long will it take me to save $13,816.45 if I make annual payments of $1,000 at 7%? Which of the following provides the greatest effective annual interest rate? 9% compounded annually? 8.5% compounded quarterly? 8% compounded monthly 7.5% compouned daily How much must I pay into my 6% savings account at the beginning of each month to have $25,000 in 4 years?

Explanation / Answer

1)

Minimum Lump Sum Money Today = Annual Payment*(1-(1+r)^-n)/r

Minimum Lump Sum Money Today = 50000*(1-(1+8%)^-20)/8%

Minimum Lump Sum Money Today = $ 490,907.37

2)

Value in 20 Year = Annual Contribution*((1+r)^n-1)/r

Value in 20 Year = 5000*((1+8%)^20 - 1)/8%

Value in 20 Year = $ 228,809.82

3)

Amount willing to pay today = Contractact Amount in 10 year/(1+r)^n

Amount willing to pay today = 50000/(1+8%)^10

Amount willing to pay today = $ 23159.67

4)

Amount worth at maturity = Investment amount*(1+r)^n

Amount worth at maturity =100000*(1+8%)^5

Amount worth at maturity = $ 146,932.81

Note Please dont ask multiple question in single question, please ask seperately

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