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10. Which lottery payout scheme is better? 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 payout, you get $3,000 today. If you pick the payments over time payout, you get three payments: $1,000 today, $1,000 one year from today, and $1,000 two years from today. At an interest rate of 6% per year, you would be better off accepting the lump sum payments over time Years after you win the lottery, a friend in another country calls to ask your advice. By wild comcidence, 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 payout or the payments over time payout. What is the best advice to give your friend? At an interest rate of 8% per year, you would be better off accepting the payout since it has the greater present value. It will depend on the interest rate; advise her to get a calculator. The lump sum payout is always better. O The payments over time payout is always better. O None of these answers is good advice. payout since it has the greater present value.

10. Which lottery payout scheme is better? 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 payout, you get $3,000 today. If you pick the payments over time payout, you get three payments: $1,000 today, $1,000 one year from today, and $1,000 two years from today. At an interest rate of 6% per year, you would be better off accepting the lump sum payments over time Years after you win the lottery, a friend in another country calls to ask your advice. By wild comcidence, 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 payout or the payments over time payout. What is the best advice to give your friend? At an interest rate of 8% per year, you would be better off accepting the payout since it has the greater present value. It will depend on the interest rate; advise her to get a calculator. The lump sum payout is always better. O The payments over time payout is always better. O None of these answers is good advice. payout since it has the greater present value.

Economics Today and Tomorrow, Student Edition
Economics Today and Tomorrow, Student Edition
1st Edition
ISBN:9780078747663
Author:McGraw-Hill
Publisher:McGraw-Hill
Chapter4: Going Into Debt
Section: Chapter Questions
Problem 29AA
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10. Which lottery payout scheme is better? 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 payout, you get $3,000 today. If you pick the payments over time payout, you get three payments: $1,000 today, $1,000 one year from today, and $1,000 two years from today. At an interest rate of 6% per year, you would be better off accepting the At an interest rate of 8% per year, you would be better off accepting the It will depend on the interest rate; advise her to get a calculator. lump sum The lump sum payout is always better. The payments over time payout is always better. None of these answers is good advice. payout since it has the greater present value. payments over time Years after you win the lottery, a friend in another country calls to ask your auvice. Dy wild comcidence, 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 payout or the payments over time payout. What is the best advice to give your friend? payout since it has the greater present value.
Transcribed Image Text:10. Which lottery payout scheme is better? 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 payout, you get $3,000 today. If you pick the payments over time payout, you get three payments: $1,000 today, $1,000 one year from today, and $1,000 two years from today. At an interest rate of 6% per year, you would be better off accepting the At an interest rate of 8% per year, you would be better off accepting the It will depend on the interest rate; advise her to get a calculator. lump sum The lump sum payout is always better. The payments over time payout is always better. None of these answers is good advice. payout since it has the greater present value. payments over time Years after you win the lottery, a friend in another country calls to ask your auvice. Dy wild comcidence, 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 payout or the payments over time payout. What is the best advice to give your friend? payout since it has the greater present value.
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