Homework answers / question archive / Today is John Smith's birthday, turning 70 years old

Today is John Smith's birthday, turning 70 years old

Finance

Share With

Today is John Smith's birthday, turning 70 years old. The average life expectancy of a 70 years old male is about 10 years. Mr. Smith wishes to buy an investment that will pay him an annuity payment, with the first payment starting today. He then wants a payment every year on his birthday up to and including the final payment on his 80th birthday, 11 payments from now. If John receives $350,000.00 for each payment on his birthday, starting today, how much does he have to pay for this annuity investment cost today if the interest rate is 4% per annum? Round your answer to two decimal places. a. $3,066,166.85 b. $2,838,813.52 OC. $3,231,679.41 d. $3,188,813.52 Oe. $2.952,366.06 QUESTION 6 Assume you have won $1 million on Lotto. You have been presented with several payout choices, and you have to make a decision on which one to accept. Provided that the interest rate is 4%, what option gives the highest payoff? The choices are as follows: a. $1 million today (t=0) b. $1.1 million today (t=1) OC. $1.4 million lump sum in 2 years d. A series of constant cash flows of $200,000 a year over 7 years starting today Oe. A series of constant cash flows of $200,000 a year over 7 years starting