You Have a Choice Between a Lottery Lump Sum Payout

question 88

Multiple Choice

You have a choice between a lottery lump sum payout of $3,800,000 today or a series of twenty annual annuity due payments.At a discount rate of 6.00%,how large must the annual annuity due payments be to make you indifferent between the two choices? Use a calculator to determine your answer.

• A)$331,301.32
• B)$351,179.40
• C)$190,000.00
• D)$312,548.41

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Definitions:

Trial Balance

An accounting report that lists the balances of all ledgers accounts to verify that total debits equal total credits.

Ledger

A comprehensive collection of a company’s financial accounts, recording all transactions and financial activities.

Supplies

Assets consumed or used in the operating activities of a business, often categorized as either office supplies or operational supplies.

Cash

Cash refers to money in the physical form of currency, such as banknotes and coins, which is used to conduct transactions.