Could someone please help I am about to pull my hair out over this one I can figure out the present value it is the part b that is throwing me off. Thank
you!
Q11. On the way to Stop&Shop you buy a lottery ticket and win $100000. The catch is that the money will be paid to to you in two installments: $50000
today and $50000 at the end of 5 years from now.
Q11-a: Assuming an interest rate of 8% what is the present value of your total lottery payments ?
Q11-b: Suppose that you invest the $50000 winnings that you receive today and earn 8% annually for the next 5 years. What is the future value of your total
lottery payments ?