Concept explainers
Lottery Winnings and Risk Analysis. Lucky Larry wins $1,000,000 in a state lottery. The standard way in which a state pays such lottery winnings is at a constant rate of $50,000 per year for 20 yr.
a. If Lucky invests each payment from the state at 4.4%, compounded continuously, what is the accumulated future value of the income stream? Round your answer to the nearest $10.
b. What is the accumulated present value of the income stream 4.4%, compounded continuously? This amount represents what the state has to invest at the start of its lottery payments, assuming the 4.4% interest rate holds.
c. The risk for Lucky is that he doesn’t know how long he will live or what the future interest rate will be; it might drop or rise, or it could vary considerably over 20 yr. This is the risk he assumes in accepting payments of $50,000 a year over 20 yr. Lucky has taken a course in business calculus so he is aware of the formulas for accumulated future value and present value. He calculates the accumulated present value of the income stream for interest rates of 3%, 4%, and 5%. What values does he obtain?
d. Lucky thinks “a bird in the hand (present value) is worth two in the bush (future value)” and decides to negotiate with the state for immediate payment of his lottery winnings. He asks the state for $750,000. They offer $600,000. Discuss the pros and cons of each amount. Lucky finally accepts $675,000. Is this a good decision? Why or why not?
Want to see the full answer?
Check out a sample textbook solutionChapter 5 Solutions
Calculus and Its Applications (11th Edition)
Additional Math Textbook Solutions
Thinking Mathematically (6th Edition)
Elementary Statistics
College Algebra with Modeling & Visualization (5th Edition)
Elementary Statistics (13th Edition)
University Calculus: Early Transcendentals (4th Edition)
- Complete the description of the piecewise function graphed below. Use interval notation to indicate the intervals. -7 -6 -5 -4 30 6 5 4 3 0 2 1 -1 5 6 + -2 -3 -5 456 -6 - { 1 if x Є f(x) = { 1 if x Є { 3 if x Єarrow_forwardComplete the description of the piecewise function graphed below. 6 5 -7-6-5-4-3-2-1 2 3 5 6 -1 -2 -3 -4 -5 { f(x) = { { -6 if -6x-2 if -2< x <1 if 1 < x <6arrow_forwardLet F = V where (x, y, z) x2 1 + sin² 2 +z2 and let A be the line integral of F along the curve x = tcost, y = t sint, z=t, starting on the plane z = 6.14 and ending on the plane z = 4.30. Then sin(3A) is -0.598 -0.649 0.767 0.278 0.502 0.010 -0.548 0.960arrow_forward
- Let C be the intersection of the cylinder x² + y² = 2.95 with the plane z = 1.13x, with the clockwise orientation, as viewed from above. Then the value of cos (₤23 COS 2 y dx xdy+3 z dzis 3 z dz) is 0.131 -0.108 -0.891 -0.663 -0.428 0.561 -0.332 -0.387arrow_forward2 x² + 47 The partial fraction decomposition of f(x) g(x) can be written in the form of + x3 + 4x2 2 C I where f(x) = g(x) h(x) = h(x) + x +4arrow_forwardThe partial fraction decomposition of f(x) 4x 7 g(x) + where 3x4 f(x) = g(x) = - 52 –10 12x237x+28 can be written in the form ofarrow_forward
- 1. Sketch the following piecewise function on the graph. (5 points) x<-1 3 x² -1≤ x ≤2 f(x) = = 1 ४ | N 2 x ≥ 2 -4- 3 2 -1- -4 -3 -2 -1 0 1 -1- --2- -3- -4- -N 2 3 4arrow_forward2. Let f(x) = 2x² + 6. Find and completely simplify the rate of change on the interval [3,3+h]. (5 points)arrow_forward(x)=2x-x2 2 a=2, b = 1/2, C=0 b) Vertex v F(x)=ax 2 + bx + c x= Za V=2.0L YEF(- =) = 4 b (글) JANUARY 17, 2025 WORKSHEET 1 Solve the following four problems on a separate sheet. Fully justify your answers to MATH 122 ล T earn full credit. 1. Let f(x) = 2x- 1x2 2 (a) Rewrite this quadratic function in standard form: f(x) = ax² + bx + c and indicate the values of the coefficients: a, b and c. (b) Find the vertex V, focus F, focal width, directrix D, and the axis of symmetry for the graph of y = f(x). (c) Plot a graph of y = f(x) and indicate all quantities found in part (b) on your graph. (d) Specify the domain and range of the function f. OUR 2. Let g(x) = f(x) u(x) where f is the quadratic function from problem 1 and u is the unit step function: u(x) = { 0 1 if x ≥0 0 if x<0 y = u(x) 0 (a) Write a piecewise formula for the function g. (b) Sketch a graph of y = g(x). (c) Indicate the domain and range of the function g. X фирм where u is the unit step function defined in problem 2. 3. Let…arrow_forward
- Question 1arrow_forward"P3 Question 3: Construct the accessibility matrix Passociated with the following graphs, and compute P2 and identify each at the various two-step paths in the graph Ps P₁ P₂arrow_forwardA cable television company estimates that with x thousand subscribers, its monthly revenue and cost (in thousands of dollars) are given by the following equations. R(x) = 45x - 0.24x2 C(x) = 257 + 13xarrow_forward
- College AlgebraAlgebraISBN:9781305115545Author:James Stewart, Lothar Redlin, Saleem WatsonPublisher:Cengage LearningAlgebra & Trigonometry with Analytic GeometryAlgebraISBN:9781133382119Author:SwokowskiPublisher:CengageAlgebra and Trigonometry (MindTap Course List)AlgebraISBN:9781305071742Author:James Stewart, Lothar Redlin, Saleem WatsonPublisher:Cengage Learning