Lottery with the same payout schemes

Assignment Help Macroeconomics
Reference no: EM131258755

Suppose you win a small lottery and have the choice of two ways to be paid: You can accept the money in a lump sum or in a series of payments over time. If you pick the lump sum, you get $2,950 today. If you pick payments over time, you get three payments: $1,000 today, $1,000 1 year from today, and $1,000 2 years from today.

1: At an interest rate of 8% per year, the winner would be better off accepting the (the lump sum,  payments over time) since it has the greater present value.

2:At an interest rate of 10% per year, the winner would be better off accepting the (the lump sum,  payments over time) since it has the greater present value.

Years after you win the lottery, a friend in another country calls to ask your advice. By wild coincidence, she has just won another lottery with the same payout schemes. She must make a quick decision about whether to collect her money under the lump sum or the payments over time. What is the best advice to give your friend?

A.  The lump sum is always better.

B.  The payments over time are always better.

C.  It will depend on the interest rate; advise her to get a calculator.

D.  None of these answers is good advice.

Reference no: EM131258755

Effect of changes in real-world competitive environment

Management in the team's organization has recognized the effect of changes in the real-world competitive environment and government policies on other industries and anticipa

Factor changing equilibrium price level and gdp

Please evaluate the effect of the following scenario on the AD curve, AS curve, and accordingly the effect on equilibrium price level and equilibrium GDP/output.

Advantages and disadvantages to the us economy

What is the argument against attempting to balance the Federal Government budget rapidly at the present time via either deep cuts in Federal Government spending or sharp inc

What is the newest instrument of monetary policy

43 If the money supply rises , what must happen to GNP under the equation of exchange  44 What is the most important form of money in the U.S.  45 What is the most important i

Calculate the expenditures by the insurer

calculate the equilibrium number of visits, and total expenditures. b) Suppose that the consumer purchases an insurance policy that allows her to pay a 25% coinsurance rate.

What are pessimistic estimates

A civil engineer involved in construction management must decide between two ways to pump concrete up to the top floors of seven story office building under construction. P

Problem regarding the government intervention

How has organizing a successful firm in a market economy changed over the last century? a) There has been no change over the last century. b) It has become easier as more and

Discuss the determinants of varying levels of income

Discuss the determinants of varying levels of income. What factors determine a person's wages. In your opinion, do these qualifications always hold true.


Write a Review

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd