Ty was seriously injured in a planking accident.He successfully sued the railway company and was awarded $700,000.The railway cannot afford to pay the lump sum immediately and would prefer to make ten annual payments (at the end of each of the next ten years).If the interest rate is 10%,then what size of payment makes Ty indifferent between the lump-sum and the payments?
A) $113,921.78
B) $70,000.00
C) $73,907.45
D) $109,074.06
E) $102,862.66

Question

Quizplus · Accepted Answer

PV = PMT × 11ea7fdb_fc1a_788e_a768_ebba6d887913_TB2902_11 PMT = PV / 11ea7fdb_fc1a_9f9f_a768_91e4b4e1afd2_TB2902_11 PMT = 700,000 / 11ea7fdb_fc1a_9fa0_a768_b1548beb4333_TB2902_11 = $113,921.78
Using a financial calculator:
N = 10, I/Y = 10, PV = -700,000, FV = 0, cpt PMT = $113,921.78

Ty Was Seriously Injured in a Planking Accident