The Solution to This Problem Requires Time Value of Money

question 107

Multiple Choice

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. Winston wins the lottery.He wins $20,000 per year to be paid to him for 10 years.The state offers him the choice of a cash settlement now instead of the annual payments for 10 years.If the interest rate is 6%, what is the amount the state will offer for a settlement today?

• A) $147,200
• B) $154,440
• C) $175,000
• D) $200,000

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Definitions:

Test Statistic

A value calculated from sample data used to make a decision about a hypothesis.

MPG

Miles per gallon, a measure of fuel efficiency in vehicles.

Matched Samples

A study design where subjects are paired based on certain characteristics to ensure comparability between treatment groups.

Independent Samples

Two or more sets of data that are collected independently of each other, not affecting one another.