A game show contestant must choose between two prizes: $500,000 in 30 years or $5,000 today. Assuming a discount rate of 12%, which is the better choice? a. The $500,000 in 30 years b. $5,000 today c. The contestant should be indifferent d. Need more information
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A game show contestant must choose between two prizes: $500,000 in 30 years or $5,000 today. Assuming a discount rate of 12%, which is the better choice? a. The $500,000 in 30 years b. $5,000 today c. The contestant should be indifferent d. Need more information
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- Suppose you play a game of chance in which five numbers are chosen from 0, 1, 2, 3, 4, 5, 6, 7, 8, 9. A computer randomly selects five numbers from zero to nine with replacement. You pay $2 to play and could profit $100,000 if you match all five numbers in order (you get your $2 back plus $100,000). Over the long term, what is your expected profit of playing the game? Can give at least an explanation? I don't really get this one.You do an experiment in which you offer participants $500 today or a different amount in the future. A participant tells you that they would be indifferent between receiving $750 4 years from now and $500 today. What is their (exponential) discount rate according to this experiment?You won a raffle while you were down the shore with friends. For your prize, you can choose among the following three alternatives. If you believe that an 8% return is the appropriate discount rate to use, what is the present value of $25,000 four years from today?
- 3. 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, 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. At an interest rate of 8% per year, the winner would be better off accepting the , since that choice has the greater present value. At an interest rate of 10% per year, the winner would be better off accepting , 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? The lump sum is…As a prize, you are offered of one of the following three options:Option 1: $6,000 today, orOption 2: $8,500 in five years, orOption 3: $10,000 in seven years.Assuming you can earn 7% on your money, which option should you choose. (Brieflyexplain your choice and show all working to justify your answer.)Mc Gregor has just won a prize in a game show with the winning prize worth RM30 million. However, he was given two options to receive those prizes: Ja. Option 1: Receive RM1 million for next 30 years beginning now. b. Option 2: Receive RM1.5 million each year from year 1 until 10" year, RM500,000 from 11 to 20 years and RM1 million from 21 until 30 years. Required : (0) Suggest which of the two is the better option and assuming the interest rate at 7 percent for the next 30 years. (Please show your work). (ii) If she is offered third options, which is to receive RM12 million one lumD Sum amount now. What is the rate of interest, that makes Mc Gregor indifferent to choose either option one or three (Show the Janswer to two decimal points)?
- Assume that Aliza has a winning lottery ticket and she are the given the option of accepting the value of P1,000,000 paying interest three years from now or taking the present value of the P1,000,000 now. The sponsor of the prize is using a 6% interest and discount rate. a. If she choose to receive the present value of the prize now, how much will she receive? b. If she choose to receive the value 3 years from now, how much will she receive? c. Which of the options will give her higher amount?You win the lottery and are offered the following choices. The appropriate discount rate is 7%. How much is each worth? Which would you choose? a. $3M today and $3M exactly 3 years from today b. $2M a year for 4 years, with the first payment starting exactly one year from today c. $350K a year forever, with the first payment starting one year from today(B) Mc Gregor has just won a prize in a game show with the winning prize worth RM30 million. However, he was given two options to receive those prizes: a. Option 1: Receive RM1 million for next 30 years beginning now. b. Option 2: Receive RM1.5 million each year from year 1 until 10" year, RM500,000 from 11 to 20 years and RM1 million from 21 until 30 years. Required : () Suggest which of the two is the better option and assuming the interest rate at 7 percent for the next 30 years. (Please show your work). (ii) If she is offered third options, which is to receive RM12 million one lumD Sum amount now. What is the rate of interest, that makes Mc Gregor indifferent to choose either option one or three (Show the answer to two decimal points)?
- Can you help me with a and b?A morning radio show offered the following four prizes as alternative prizes for one of its competitions. Which prize is the most valuable if your discount rate is 6%? (Show working to justify your answer.) (a) $5,000 per year, forever, with the first amount paid after 1 year. (b) $12,000 per year for eight years, with the first amount paid today. (c) $20,000 today and $80,000 six years from now. (d) $15,000 per year for ten years, with the first amount paid at year 5. (e) State the most valuable prize. (Give a reason for your choice.)As the winner of a competition you are entitled to $5,000 at the end of next year, with this amount growing at 10% p.a. until the end of year 10. Assuming the interest rate for valuing this prize is 5% p.a., the future value of this prize at the end of year 10 is closest to: Group of answer choices $59,233. $96,485. $153,634. The future value cannot be calculated.