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1.Your local Help Gamblers Quit (HGQ) charity is holding a sweepstakes contest. The winner will...

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Finance

1.Your local Help Gamblers Quit (HGQ) charity is holding a sweepstakes contest. The winner will be chosen on January 1, 2022. On that date the winner can choose between a lump sum payment of $528,145.16 cash or an annuity consisting of 31 payments of $32,258.06, with the first annuity payment made on January 1, 2022 and subsequent payments made at intervals of one year. a)HGQ considers the two alternatives (lump sum and annuity) as equivalent prizes. Calculate the interest rate used by HGQ. b)Consider the case of a charity offering the same lump sum cash prize but offering 61 semi-annual awards, with the first award being given on January 1, 2022. Compute the equivalent semi-annual award using an effective annual interest rate of 4%.

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