Please answer and explain how you got it. Thank you! Suppose you were the $i mil
ID: 1099909 • Letter: P
Question
Please answer and explain how you got it. Thank you!
Suppose you were the $i million winner of Survivor - Philippines -- and you had the following choice: 20 annual payments of $50,000 (that's $1 million in total), or (B) A lump sum now of $500,000 As someone mentioned, you can invest the $500,000 at once, or you can invest each installment as you receive it. Remember, we are interested in the value of the money 19 years from now An interest rate such that it is better to invest the $500,000 at once rather than invest each installment as you receive it (please include the interest rate and the values of both scenarios) An interest rate such that it is less beneficial to invest the $500,000 at once rather than invest each installment as you receive it (please include the interest rate and die values of both scenarios) The interest rate such that you are indifferent between investing the $500,000 at once and investing each installment as you receive it (please include the interest rate and the values of both scenarios) - it is tricky to find the exact value, so you will get credit as long as you are close.Explanation / Answer
Future value of installments = 50000*(1+r)^20 + 50000*(1+r)^19 + 50000*(1+r)^18