Tracy won a $100 million jackpot. She can receive the jackpot as a $5 million payment each year for 20 years, or she can ask to receive the present value of all those payments all at once now. Assume an annual interest rate of 5 percent. If she decides to take the present value payment, about how much will she receive?
$52.1 million
$71.4 million
$62.3 million
$78.6 million
and
Matt, a star basketball player, is looking to join a new NBA team. The Bulls are offering him $24 million for one year. The Heat is offering him $10 million this year and $7.0 million in each of the next two years. The market interest rate is 5 percent. What is the present value of the offer from The Heat in millions (rounded to the nearest one hundred thousand dollars)?
$23.0 million
$24.0 million
$22.5 million
$25.2 million