You Have Won the Lottery and Received a Check for $1,275,156

question 36

Multiple Choice

You have won the lottery and received a check for $1,275,156 today.You invest the lottery check today at an annual interest rate of 8% and allow it to build for a full ten years.At that point in time,you shift the money to an account paying only 6% per year.You plan to spend $175,000 per year in retirement (assume equal annual end-of-the-year cash flows) for 30 years,and your first retirement cash flow is exactly eleven years from today.Will you have enough money to fully fund your desired retirement? Use a calculator to determine your answer.

• A)Yes,because your investment will allow you to spend up to $225,000 per year in retirement.
• B)No,because your investment will allow you to spend up to only $158,000 per year in retirement.
• C)Yes,because your investment will allow you to spend up to $200,000 per year in retirement.
• D)No,because your investment will allow you to spend up to only $137,000 per year in retirement.

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Definitions:

Scarcity

The fundamental economic problem of having seemingly limitless human wants in a world with limited resources.

Government Intervention

Actions taken by a government to influence or regulate economic activities, often to correct market failures or achieve social goals.

Market Economy

An economic system where supply and demand from consumers determine the production of goods and services rather than government intervention.

Economy's Performance

An evaluation of how well an economy is doing, commonly measured by indicators such as GDP growth, unemployment rates, and inflation.