A sweepstakes winner can choose one of two prizes: $500,000 in 40 years or $1,500 today. If the discount rate is 12%, which is the better choice?
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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 informationYou 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 $75,000 four years from today?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.)
- Type 2D: Prizes are often not "worth" as much as claimed. Publisher's Clearing House has been advertising a sweepstake, "Win $5,000 a Week Forever - You'd get $5,000.00 a week for life, then after that, someone you choose gets $5,000.00 a week for their life!" What is the value of this sweepstake in today's term if you are the winner? beginning of each week beginning today and assume You will receive $5, 000 forever at the that the average annual interest for the 'long' years to come is 5.2%.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 todayYou have just won a two-part lottery! The first part will pay you $50,000 at the end of each of the next 20 years. The second part will pay you $1,000 at the end of each month over the same 20 year period. Assuming a discount rate of 9%, what is the present value of your winnings? use a HP 10bII+ to solve it
- A raffle is going to be held in which there is a first prize worth $500, a second worth 50,and two third prizes that are worth $5 each. If 100 tickets are to be sold, what is the fair price for a ticket?The top prize for the state lottery is $105,000,000. You have decided it is time for you to take a chance and purchase a ticket. Before you purchase the ticket, you must decide whether to choose the cash option or the annual payment option. If you choose the annual payment option and win, you will receive $105,000,000 in 20 equal payments of $5,250,000—one payment today and one payment at the end of each of the next 19 years. If you choose the cash payment, you will receive a one-time lump sum payment of $63,830,111.58. You can invest the proceeds and earn 7%. At what interest rate would you be indifferent between the cash and annual payment options? (Round factor values to 3 decimal places, e.g. 1.521 and final answer to 0 decimal places, e.g. 15%.)Click here to view the PV Table. Interest rate %Marcus has won a $3,000,000 state lottery. He can take his prize as either 20 yearly payments of $150,000 or a lump sum of $1,275,000. Which is the better option? Assume an interest rate of 10%. Select the correct choice below and, if necessary, fill in the answer box to complete your choice. (Round to the nearest dollar as needed.) O A. The present value of the lottery winnings is $ this is worse than the lump sum of $1,275,000. B. The present value of the lottery winnings is $ this is better than the lump sum of $1,275,000. O C. The present value of the lottery winnings is the same as the lump sum of $1,275,000. Click to select and enter your answer(s) and then click Check Answer. All parts Clear javascript:doExercise(6): a 10:44 PM 10/26/2020 20
- Your friend just won the lottery. He has a choice of receiving $100, 000 at the end of each year for the next 30 years or a lump sum today. The lottery uses an 6% annual discount rate. What lump sum would your friend receive if he chose this option?You Answered Correct Answers You won the lottery. You could receive $100,000 a year for the next 10 years or a lump sum today. The lottery uses a 12 percent discount rate (compounded annually). What would be the lump sum amount you would receive today? 632,824.98 565,022.3 (with margin: 100)Congratulations! You have just won a small lottery. Lottery officials give you three alternatives for receiving your winnings: a)$8000 now b)$1000 per year for 12 years c)$15000 in 10 years If you can earn 6.5% on your money, which alternative should you choose?
