Suppose You Have a Winning Lottery Ticket and You Are

question 214

Multiple Choice

Suppose you have a winning lottery ticket and you are given the option of accepting $3,000,000 three years from now or taking the present value of the $3,000,000 now. The sponsor of the prize uses a 5% discount rate. If you elect to receive the present value of the prize now, the amount you will receive is

• A) $2,591,520.
• B) $2,518,860.
• C) $2,670,000.
• D) $3,000,000.

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Definitions:

Expressly Agree

To give a clear and definite agreement or consent to a specific term or condition.

Liquidation

In regard to corporations, the process by which corporate assets are converted into cash and distributed among creditors and shareholders according to specific rules of preference. In regard to bankruptcy, a proceeding under Chapter 7 of the Bankruptcy Code, often referred to as ordinary or straight bankruptcy, in which a debtor states his or her debts and turns all nonexempt assets over to a trustee, who sells the nonexempt assets and distributes the proceeds to creditors. With certain exceptions, the remaining debts are then discharged, and the debtor is relieved of the obligation to pay the debts.

Dissolution

The process of legally terminating the existence of an entity such as a corporation or partnership.

Withdraw

The act of formally leaving a particular status or position, such as removing oneself from a legal case or retracting a statement.