5. Suppose that as a lottery prize you win a trip worth $8,000. You are uninterested in the trip, but under the terms of the prize you can collect the $8,000 in cash, but only if you do not redeem the prize for 3 years. If the interest rate is 5%, the present value of the prize is a) $6911 b) $7619 c) $8,000 d) $21,786
5. Suppose that as a lottery prize you win a trip worth $8,000. You are uninterested in the trip, but under the terms of the prize you can collect the $8,000 in cash, but only if you do not redeem the prize for 3 years. If the interest rate is 5%, the present value of the prize is a) $6911 b) $7619 c) $8,000 d) $21,786
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
![5. Suppose that as a lottery prize you win a trip worth $8,000. You are uninterested in
the trip, but under the terms of the prize you can collect the $8,000 in cash, but only if
you do not redeem the prize for 3 years. If the interest rate is 5%, the present value of the
prize is
a) $6911
b) $7619
c) $8,000
d) $21,786](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F827ba08d-994f-4772-baee-875014f5695d%2Fab4fbde3-521f-47b2-b1f5-59e00812ac95%2F7z5wu4_processed.png&w=3840&q=75)
Transcribed Image Text:5. Suppose that as a lottery prize you win a trip worth $8,000. You are uninterested in
the trip, but under the terms of the prize you can collect the $8,000 in cash, but only if
you do not redeem the prize for 3 years. If the interest rate is 5%, the present value of the
prize is
a) $6911
b) $7619
c) $8,000
d) $21,786
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