Question 1
You invest $2,500 a year for three years at 8 percent.
a. What is the value of your investment after one year? Multiply $2,500 X 1.08.
b. What is the value of your investment after two years? Multiply your answer to part a by 1.08.
c. What is the value of your investment after three years? Multiply your answer to part b by 1.08. This gives your final answer.
d. Confirm that your answer is correct by using Excel formulas.
Question 2
Rita Gonzales won the $60 million lottery. She is to receive $1 million a year for the next 50 years plus an additional lump sum payment of $10 million after 50 years. The discount rate is 10 percent. What is the current value of her winnings?