You Have Just Turned 25 and May Now Spend a Portion

question 2

Multiple Choice

You have just turned 25 and may now spend a portion of the trust fund your parents established for you.The terms of the trust fund allow you to withdraw 60 beginning-of-the-year cash flows of $100,000 each.An investment firm has offered to pay you cash for all of the fund today.If the rate they use to discount the cash flows is 16% per year,what is their offer price today for your pension fund?

• A)$4,605,750,853
• B)$6,000,000.00
• C)$624,915.20
• D)$724,901.63

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Definitions:

Conditioned Responses

Learned reactions or responses to previously neutral stimuli that have been associated with a significant event, like Pavlov's dogs salivating at the sound of a bell.

Irrational Thinking

Cognitive processes that are not based on logic or rationality, often leading to erroneous conclusions or actions.

Aversive Conditioning

A behavioral training method that uses negative stimuli to reduce or eliminate unwanted behaviors.

Exposure Therapy

A psychological treatment method that reduces fear and anxiety responses by gradually and repeatedly exposing individuals to feared objects or situations.