(TCO B) Evelyn has just won a raffle at work. The prize is $20,000. Consider the
ID: 2675014 • Letter: #
Question
(TCO B) Evelyn has just won a raffle at work. The prize is $20,000. Consider the following two scenarios independently.a. The prize will be paid in equal increments over ten months starting today. If the appropriate discount rate is 6%, how much did Evelyn really win?
b. The $20,000 is paid today. Evelyn deposits this $20,000 in a money market account paying 4% compounded quarterly. If Evelyn leaves this deposit in the account for 3 years, how much will she have at the end of three years?
(Points : 20)
Explanation / Answer
a. 2,000((1-(1/(1+.06)^10))/.06)=$14,720.17 b. 20,000*(1+.04)^12=$32,020.64
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