You Are Considering Two Lottery Payment Streams

question 56

Essay

You are considering two lottery payment streams. Choice A pays $1,000 today and choice B pays
$1,750 at the end of five years from now. Using a discount rate of 5%, based on present values,
which would you choose? Using the same discount rate of 5%, based on future values, which would
you choose? What do your results suggest as a general rule for approaching such problems? (Make
your choices based purely on the time value of money.)

---

Definitions:

Pesticide Spraying

The application of chemicals to crops and other areas to control pests and diseases that can damage agricultural production and natural environments.

World Health Organization

An international public health agency of the United Nations responsible for global health matters, including disease outbreaks and global healthcare standards.

Carrying Capacity

The largest number of individuals of a species that can be supported by an environment over an indefinite period, based on the resources it has available.

Species Diversity

The variety of different types of species in a particular region or ecosystem.