Lecture3_Problem2 - Lecture 3 Comprehensive Problem Today...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Lecture 3 Comprehensive Problem Today is 1/1/2011. You just won a lottery with prize money of $1 , 000 , 000. However, as the lotteries often work, you don’t get the entire amount today. Instead, the lottery organization offers you two choices: (i) accept 20 equal annual payments of $50 , 000 with the first payment beginning today, or (ii) accept a lump- sum payment of $570 , 000 today. You are confident that you can invest money at the stated interest rate of 6% compounded quarterly. You are planning to save all the money from the lottery. Additionally, you are planning to use the money you earn at your job to save an extra $5 , 000 a year for retirement, with the first such extra deposit into your retirement account starting next year (1/1/2012). You expect that you will be able to grow this extra savings by 3% annually and make the last deposit in 40 years (1/1/2051). You plan to retire in 41 years (1/1/2052) and plan to withdraw a fixed amount of money from your retirement account on the first of every month for the following 20 years with the first withdrawal on 1/1/2052 and the last withdrawal on 1/1/2072. After you make your last withdrawal on 1/1/2072, you want to havethe last withdrawal on 1/1/2072....
View Full Document

This note was uploaded on 10/21/2011 for the course RSM 332 taught by Professor Raymondkan during the Spring '08 term at University of Toronto.

Page1 / 3

Lecture3_Problem2 - Lecture 3 Comprehensive Problem Today...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online