Suppose That You Have a Winning Lottery Ticket for $100,000

question 111

Essay

Suppose that you have a winning lottery ticket for $100,000. The State of California doesn't pay this amount up front - this is the amount you will receive over time. The State offers you two options. The first pays you $80,000 up front and that will be the entire amount. The second pays you winnings over a three year period. The last option pays you a large payment today with
small payments in the future. The payment options are detailed in the table below:

Compute the present value of each payment option, assuming the interest rate is 12%. Now, compute the present values based on an interest rate of 5%. Compare your answers, explaining why they are different when the interest rate changes. When the interest rate is 5%, the present values are as follows:

---

Definitions:

Self-talk Statements

Internal or verbal statements that individuals make to themselves which affect their state of mind and behavior.

Self-respect

A sense of personal worth and dignity, which reflects an individual's valuation of themselves and their actions in a moral or ethical context.

Self-efficacy

An individual's belief in their own ability to complete tasks and reach goals.

Self-concept

An individual's perception and understanding of themselves, encompassing self-image, self-esteem, and the roles they perceive themselves to play.