Asked by Mohd Najyasyraf Hussin on May 16, 2024
Verified
A lottery offers the winner the choice between a $150,000 cash prize or month-end payments of $1,000 for 12½ years, increasing to $1,500 per month for the next 12½ years. Which alternative would you choose if money can earn 8.25% compounded monthly over the 25-year period?
Compounded Monthly
Monthly calculation of interest that factors in the original principal and also the accumulated interest from the past periods.
Month-End Payments
Regular payments made at the end of each month, often related to financial transactions such as loan repayments or rent.
Cash Prize
A monetary award given to a winner or recipient in contests, competitions, or lotteries.
- Analyze investment choices by applying the concepts of future value and present value.
Verified Answer
GD
germin Delos SantosMay 20, 2024
Final Answer :
Choose the $150,000 cash prize since it has the greater economic value
Learning Objectives
- Analyze investment choices by applying the concepts of future value and present value.