# Question & Answer: A graduating senior decides to take a year off and work to save money for college. The student plans to invest all money e…..

A graduating senior decides to take a year off and work to save money for college. The student plans to invest all money earned in a savings account earning 6% interest, compounded quarterly. The student hopes to have \$5000 by the time school starts in 12 months. How much money will the student have to save each month? Sketch the cash flow diagram. A) \$396/month B) \$405/month C) \$407/month D) \$411/month The Powerball Lottery, worth \$182 million, was won by a single individual. The winner was given two choices: receive 26 payments of \$7 million each with the first payment to be made immediately and the rest to be made at the end of each of the next 25 years, or receive a single lump-sum payment now that would be equivalent to the 26 payments of \$7 million each. If the state uses an interest rate of 4% per year, calculate the amount of the lump sum payment.