Homework: Financial Management
Details
Who Wants to Be a Millionaire?
I. You just won $1 million dollars in the lottery! They offer you two options for your winnings: a lump sum payment right now, or $100,000
a year over the next 10 years. Current 10-year interest rates are at 5%, and the current tax on lottery winnings is 40%.
a. What is the amount you will receive today with the lump sum option?
b. Which option would you select? How would you present your argument for your decision in a debate?
II. Sorry, you didn't win the lottery, but here's a way you can still be a millionaire! Starting at age 22, every night you take $5 out of your pocket and put it in a manila envelope (title it "Lottery Winnings"). At the end of the year, you place the money from the envelope in a stock fund with an average interest rate of 10%.
a. How much will you have in the account when you retire at age 65?
b. What would be different if you started this plan later in your life?
Format your homework according to the following formatting requirements:
o The answer should be typed, using Times New Roman font (size 12), double spaced, with one-inch margins on all sides.
o The response also includes a cover page containing the title of the homework, the student's name, the course title, and the date. The cover page is not included in the required page length.
o Also include a reference page. The Citations and references must follow APA format. The reference page is not included in the required page length.