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Style:
APA
Subject:
Accounting, Finance, SPSS
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English (U.S.)
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Topic:

Lottery Jackpot

Essay Instructions:

Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both.
A. You have just won the Strayer Lottery jackpot of $11,000,000. You will be paid in 26 equal annual installments beginning immediately. If you had the money now, you could invest it in an account with a quoted annual interest rate of 9% with monthly compounding of interest. What is the present value of the payments you will receive?

Essay Sample Content Preview:

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The amount to be won of the lottery is $11,000,000. The installments are to begin as soon as possible, whereby they are to be paid in 26 installments annually. This means that one installment will be 11,000,000 divided by 26, which gives us $423,076.92
9% is the interest rate which is to be compounded monthly on an annual rate. Annual interest is calculated using the formula;
((1+r) 12 - 1), where r= 9%
and since there are 12 months in a year, it is compounded 12 times
Substituting the values correspondently;...
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