Suppose in Problem 2.21 that you have a large mortgage you want to pay off now. You propose an alternative, but equivalent, payment scheme. You would like $300 000 today, and the balance of the prize in five years when you intend to purchase a large piece of waterfront property. How much will the payment be in five years? Assume that annual interest is 10%, compounded monthly.
Problem 2.21:
You have just won a lottery prize of Si 000 000 collectable in 10 yearly installments of 100 000 rupees, starting today. Wh y is this prize not really Si 000 000? What is it really worth today if money can be invested at 10% annual interest, compounded monthly? Use a spreadsheet to construct a table showing the present worth of each installment, and the total present worth of the prize.