See attached doc. In case of anything else you can always get back at me.
Since the jackpot amount of $11,000,000 is paid in 26 equal monthly installments, we can
determine the amount of each payment (PMT) as follows:
PMT = $11,000,000 ÷ 26 = 423,076.9
The annual rate of interest on invested money is 9% with monthly compounding of interest and
therefore we need to calculate the effective annual rate (EAR) in this case.
EAR = = (1 + Nominal Rate / n) n – 1
EAR = (1 + 0.09/12)12 – 1
EAR = 9.38%
We will then use the formula for the present value of annuity due to calculate the present value
of an annuity due formula. The formula for the present value of annuity due is given as follows:
P = (PMT [(1 - (1 / (1 + r) n)) / r]) x (1+r)
P = present value of the annuity
PMT = annuity payment
r = interest rate.
n= number of periods over which payments are made. 423,076.9
Therefore, P = ($423,076.9 [(1 - (1 / (1 + 0.0938) 26)) / 0.0938]) x (1+0.0938)
P = $423,076.9 × 10.5271
P = $4,453,772.83
Therefore, the present value of the payments that I will receive is $4,453,772.83
Question B: Bond Ratings.
Bond rating is a classification given to a bond that indicates its credit quality and t...