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BUS523 Quantitative Analysis for Decision Making

Unit 5 Discussion

Unit 5 DB: Time Value of Money

You have just won the $1,000,000 in the lottery. You have the option of taking a lump sum payout or equal annualized payments over 20 years. Ignoring any tax consequences; how much should you expect from the annualized payments what target interest rate would make the annualized payments more valuable than the lump sum. In your response, you may want to consider such issues as inflation, investing a lump sum in the stock market (What have been the long-term historical returns?) to generate your own annualized payment schedule, as well as the psychological components – receiving a $1,000,000 check.

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