14 Nov MATH 1581 Nominal Rate Business Mathematics Worksheet
Keiko wins the lottery! She has a choice between
Option A: $13,000,000.00 received today.
Option B: 21 payments of $871,624.41 at the start of every year for 21 years, with the first payment today.
The nominal annual interest rate is i(4) = 6.000%. Keiko wants you to advise them which option to choose.
a) Build a spreadsheet (see the posted example) to compare the present value of the 2 options. Which would you recommend?
b) Suppose instead you assumed they would never spend any of the money, instead saving it all until the time of the last payment of Option B. Find the future value of both options at this time. Would this calculation change your recommendation?
c) If the interest rate were i(4) = 1.000% instead, would that change which option you recommend?
d) Obviously there is some interest rate i(4) at which the present value of the two options is the same. Find that value (accurate to 3 decimal places, e.g. 3.456%) using either trial and error or goal seek. (Warning: if you are using trial and error using only 3 decimal places for the interest rate, the present values you compute might not match exactly!)
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.