Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 8, Problem 1RQ
To determine
Systematic errors.
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3. Which lottery payout scheme is better?
Suppose you win a raffle held at a neighborhood elementary school fundraiser and are given the choice between two different ways to be paid. You
can either accept the money in a lump sum immediately or in a series of payments over time. If you choose the lump sum payout, you receive $3,000
today. If you choose to collect payments over time, you receive three payments: $1,000 today, $1,000 1 year from today, and $1,000 2 years from
today
At an interest rate of 6% per year, the winner would be better off accepting the
value.
since that choice has the greater present
At an interest rate of 10% per year, the winner would be better off accepting
A couple years after you win the raffle, you and your friend are back at the same event. This time, your friend gets lucky and wins the contest, and
you both realize the payout schemes are the same as they were back when you won. They now face the decision between collecting their prize as a
lump sum or as a…
3. Which lottery payout scheme is better?
Suppose you win a raffle held at a minor league baseball game and are given the choice between two different ways to be paid. You can either accept
the money in a lump sum immediately or in a series of payments over time. If you choose the lump sum payout, you receive $3,000 today. If you
choose to collect payments over time, you receive three payments: $1,000 today, $1,000 1 year from today, and $1,000 2 years from today.
At an interest rate of 6% per year, the winner would be better off accepting the
value.
, since that choice has the greater present
O The lump sum is always better.
The payments over time are always better.
O It will depend on the interest rate; advise her to get a calculator.
O None of these answers is good advice.
At an interest rate of 10% per year, the winner would be better off accepting
A couple years after you win the raffle, you and your friend are back at the same event. This time, your friend gets lucky and wins the…
3. Which lottery payout scheme is better?
Suppose you win a raffle held at a neighborhood elementary school fundraiser and are given the choice between two different ways to be paid. You
can either accept the money in a lump sum immediately or in a series of payments over time. If you choose the lump sum payout, you receive $2,950
today. If you choose to collect payments over time, you receive three payments: $1,000 today, $1,000 1 year from today, and $1,000 2 years from
today.
At an interest rate of 10% per year, the winner would be better off accepting the
present value.
since that choice has the greater
At an interest rate of 12% per year, the winner would be better off accepting
since it has the greater present value.
A couple years after you win the raffle, you and your friend are back at the same event. This time, your friend gets lucky and wins the contest, and
you both realize the payout schemes are the same as they were back when you won. They now face the decision between…
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