contestada

David won the lottery. He can take a single lump sum payout of $10 million dollars or receive $750,000 per year for the next 25 years. What rate of return would David need to break even if he took the lump sum amount instead of the annuity

Relax

Respuesta :

abiolataiwo2015

The rate of return would David need to break even if he took the lump sum amount instead of the annuity is 5.56%.

Rate of return to break even

First step is to calculate the rate for the period of 25 years

Rate= Single lump sum/Dollar amount received×100

Rate=$10 million/$750,000×100

Rate= 13.33%

Second step

Using annuity date to find the rate of return needed to break even. Based on the  Annuity table 13.33% for the time period of 25 years is 5.56%.

Therefore the rate of return would David need to break even if he took the lump sum amount instead of the annuity is 5.56%.

Learn more about rate of return here:https://brainly.com/question/13275966

#SPJ1

Otras preguntas