Assume That You Have Just Won $5,000,000 in the Lottery

question 130

Multiple Choice

Assume that you have just won $5,000,000 in the lottery and will receive $250,000 per year for the next 20 years. How much is your prize worth today if the interest rate is 8%?

• A)$1,072,731
• B)$2,454,525
• C)$2,185,219
• D)$1,165,250

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Definitions:

Treasury Bills

Short-term government securities issued at a discount from the face value and maturing at par, offering a return to investors.

Dividend

A portion of a company's earnings distributed to its shareholders, usually in the form of cash or additional stock.

Expected Rate Of Return

The anticipated gain or loss on an investment over a specific period, usually expressed as a percentage.

Portfolio

An assortment of monetary assets such as shares, bonds, goods, money, and money equivalents, along with closed-end funds and exchange-traded funds (ETFs).