QUESTION

Hello, Taking a Finance 6500-level course. I generally understand TVM, but I'm having difficulty wrapping my head around how to solve for the first...

Hello, Taking a Finance 6500-level course. I generally understand TVM, but I'm having difficulty wrapping my head around how to solve for the first part of problem. I have solved for the 2nd part of the problem. I need to format the solution for the first part similar to how I show solving the second part.

In 2016 A Pevely man won the Missouri lottery and was given the choice of receiving $6.8 million in cash immediately, or 25 annual payments of$400,000 each (also beginning today). At what interest rate

would he be indifferent between the two options? Suppose he believes he could earn 6% annually on

his investments. Which option should he take?

Question 5b) Suppose he could earn 6% annual interest on his investments. Which options should he take?

Lump Sum Calculation

1.     Clear All (Orange Button, C/C All)

2.     6,800,000 PV (Present Value) button

3.     6.0 I/YR (Interest/ Year) button

4.     25 N (Number of Years) button

5.     0 PMT (Payment Amount button

6.     Press FV for Future Value calculation

Lump Sum Future Value = 29,184,720.89

Annuity Payment Calculation

1.     Clear All (Orange Button, C/C All)

2.     0 PV (Present Value) button

3.     6.0 I/YR (Interest/ Year) button

4.     25 N (Number of Years) button

5.     400,000 PMT (Payment Amount button

6.     Press FV for Future Value calculation

Annuity Payment Future Value = 21,945,804.80

He should choose the Lump Sum Payment