Carolyn Fields Has Just Won the State Lottery Present Value of $1

question 19

Essay

Carolyn Fields has just won the state lottery.The state offers the following three payout options for after-tax prize money:
1.$50,000 per year at the end of each of the next six years
2.$300,000 (lump sum)now
3.$400,000 (lump sum)six years from now
Calculate the present value of each scenario using an 8% annual discount rate.Round to nearest whole dollar.
Present value of an ordinary annuity of $1:
$$\begin{array} { | c | r | r | r | } \hline & 7 \% & 8 \% & 9 \% \\\hline 1 & 0.935 & 0.926 & 0.917 \\\hline 2 & 1.808 & 1.783 & 1.759 \\\hline 3 & 2.624 & 2.577 & 2.531 \\\hline 4 & 3.387 & 3.312 & 3.240 \\\hline 5 & 4.100 & 3.993 & 3.890 \\\hline 6 & 4.767 & 4.623 & 4.486 \\\hline\end{array}$$ Present value of $1:
$$\begin{array} { | c | r | r | r | } \hline & 7 \% & 8 \% & 9 \% \\\hline 1 & 0.935 & 0.926 & 0.917 \\\hline 2 & 0.873 & 0.857 & 0.842 \\\hline 3 & 0.816 & 0.794 & 0.772 \\\hline 4 & 0.763 & 0.735 & 0.708 \\\hline 5 & 0.713 & 0.681 & 0.650 \\\hline 6 & 0.666 & 0.630 & 0.596 \\\hline\end{array}$$

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Definitions:

Passively Respond

A behavior or response where an individual does not actively engage or react in a situation but instead allows things to happen without direct interaction.

Freud

Sigmund Freud, an Austrian neurologist and the founder of psychoanalysis, a method for treating psychopathology through dialogue between a patient and a psychoanalyst.

Sexually Promiscuous

Describing individuals who engage in sexual activities with multiple partners frequently and without deep emotional attachments.

Narcissistic Character

A personality trait characterized by a grandiose sense of self-importance, a need for admiration, and a lack of empathy.