Suppose You Hit a Progressive Jackpot on a Slot Machine

question 156

Essay

Suppose you hit a progressive jackpot on a slot machine in a casino in Atlantic City and are given the choice of the following prizes:
Prize 1: $150,000 to be received right away, with three additional payments of $150,000 to be received each year for the next three years.
Prize 2: $500,000 to be received right away.
If the interest rate is 5 percent, what is the present value of each prize?

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Definitions:

Peace of Riga

The Peace of Riga, signed in 1921, ended the Polish-Soviet War, with Poland and Soviet Russia dividing the territories of Belarus and Ukraine between them.

Newly Independent Nation

A country that has recently achieved independence from another state or colonial power, often after a struggle or negotiation.

Nationalist Movement

A political, social, or cultural movement aimed at gaining or maintaining a sense of national identity, sovereignty, or independence for a particular group or territory.

Mahatma Gandhi

An Indian lawyer, anti-colonial nationalist, and political ethicist who led the successful campaign for India's independence from British Rule, and in doing so, employed non-violent resistance as a pivotal political tool.