Mary Alice Just Won the Lottery and Is Trying to Decide

question 74

Multiple Choice

Mary Alice just won the lottery and is trying to decide between the options of receiving the annual cash flow payment option of $250,000 per year for 25 years beginning today, or receiving one lump-sum amount today. Mary Alice can earn 6% investing this money. At what lump-sum payment amount would she be indifferent between the two alternatives? (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

• A) $6,250,000.
• B) $3,195,840.
• C) $3,637,590.
• D) $3,387,590.

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Definitions:

IDEAS Process

An acronym for Identify, Define, Explore, Act, and Look back; a problem-solving methodology.

Enumerate Options

To list or tally all possible choices or alternatives available in a given situation.

Physical Domain

The realm of physical existence, as opposed to the conceptual, virtual, or metaphysical domains.

College Students

People attending a higher education institution to obtain a degree or certification.