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30 May, 02:52

The Super Ball lottery was won by Joan; her winnings were $500,000.00 to be paid in quarterly payments of $12,500.00 each over the next 10 years. How much must Super Ball deposit in an account paying 8 percent interest compounded quarterly for 10 years in order to meet their commitment to Joan?

$341,937.50

$500,000.00

$755,021.75

$341,924.78

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Answers (2)
  1. 30 May, 05:17
    0
    super ball lottery should deposit $341,937.50
  2. 30 May, 06:02
    0
    In order to pay the quarterly payments of $12,500 each over the next 10 years, Super Ball needs to deposit the present value of these quarterly payments.

    The present value of these quarterly payments is calculated as follows:

    Quarterly payments of $12,500

    Quarterly Interest rate (8%/4) = 2%

    Number of quarters = (10 years * 4) = 40

    Present value of annuity $1 (2%, 40 periods) = 27.355

    Present value of these quarterly payments = $12,500 * 27.355 = $341,937.50

    Hence, Super Ball should deposit $341,937.50 in the account.
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