1.) The super prize in a contest is $10 million. This prize will be paid out in equal yearly payments over the next 25 years.
If the prize money is guaranteed by AAA bonds yielding 3% and is placed into an escrow account when the contest is announced 1 year before the first payment, how much do the contest sponsors have to deposit in the escrow account? (Round your answer to the nearest cent.)
2.) Before his first attempt at bungee jumping, John decides to buy a life insurance policy. His annual income at age 30 is $39,000, so he figures he should get enough insurance to provide his wife and new baby with that amount each year for the next 35 years.
If the long-term interest rate is 6.9%, what is the present value of John's future annual earnings? (Round your answer to the nearest cent.) Rounding up to the next $50,000, how much life insurance should he buy? (Round your original answer to the nearest $50,000.)