Question

QUANTITATIVE REASONING FOR BUSINESs An Inquiry-Based Approach 6. (7.10) Congratulations-you just won the Powerball $60 million jackpot! How much money will you have after 30 years if you receive a lump sum of $32 million now and deposit it into an account earning 2% annual interest compounded annually? a) b) How much money will you have after 30 years if you receive a payment of $1.3 million each year and deposit it into an account earning 2% annual interest compounded annually? c) Which is the better choice in the long run? d) What could you do to make the choice of annual payments more appealing?

Answer 1

に2y. ご书320DODOD ( 1+0.ต.) O Dbbo(I $57963570.67 130 b0oD F $5273 3502.7

c) offcours first one is better choice, as we are investing whole $32 million at a time we are getting 2% interest every year for whole amount, but in second option we are going to invest $1.3 million every year therefore will receive less interest every year. Hence less mature value in second option as compared to first one. First one call time deposit scheme and second one called recurring deposit.

d) if we compound money at monthly basis then will get more interest on amoiam deposited. Therefore to get more mature value at the end of 30 years we can invest money and make it monthly compounding.

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