You Have Just Won a $5 Million Lottery to Be

question 152

Multiple Choice

You have just won a $5 million lottery to be received in twenty annual equal payments of $250,000. What will happen to the present value of your winnings if the interest rate increases?

• A)It will be worth less.
• B)It will be worth more.
• C)It will not change.
• D)None of the above

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Definitions:

Dollar Terms

Financial transactions or economic measurements that are denominated in the U.S. dollar currency.

Opportunity Cost

Opportunity cost is the value of the next best alternative foregone as the result of making a decision, essentially what you give up to get something else.

Benefits

Various forms of value or advantages that individuals or organizations receive, which can include health insurance, pensions, or profits.

Costs

The expenditure required to produce, acquire, or maintain a product or service, including materials, labor, and overhead expenses.