Willis Has Won the $4,700,000 State Lottery and Intends to Save

question 21

Multiple Choice

Willis has won the $4,700,000 state lottery and intends to save all of the money for his retirement.He chooses to receive an annual cash flow of $235,000 for twenty years,with the first payment to be received one year from today.How much money will be in his retirement account in twenty years if he can reinvest his money at an annual rate of 6.75%?

• A)$9,374,989
• B)$17,356,235
• C)$10,007,801
• D)$4,700,000

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Definitions:

Selling A Call

A strategy in options trading where the seller of the call option is obligated to sell the underlying asset at a specified price if the option is exercised.

Stock Price

The cost of purchasing a share of a company's stock, reflecting the market's valuation of the company.

Hedging

A financial strategy used to reduce or eliminate the risk of price fluctuations for commodities, currencies, or securities.

Futures Contracts

Standard legal contracts for purchasing or selling a certain commodity or financial instrument at an agreed upon price at a future date.