Prizes Are Often Not "Worth" as Much as Claimed

question 89

Multiple Choice

Prizes are often not "worth" as much as claimed.What is the value of a prize of $5,000,000 that is to be received in 20 equal yearly payments,with the first payment beginning today? Assume an interest rate of 7%.

• A) $2,833,898.81
• B) $2,911,015.68
• C) $2,609,144.14
• D) $2,738,304.13

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Definitions:

Negotiable Promissory Note

A financial document that contains a written promise to pay a specified sum of money to a named person or bearer under certain terms.

Worthless Securities

Financial instruments that have lost all monetary value, often resulting in a total loss for the holder.

Holder in Due Course

A legal term for a person who has acquired a negotiable instrument in good faith and for value, and thus has certain rights to it free from many defenses.

Restrictive Indorsement

A signature on a negotiable instrument, such as a check, that limits how the instrument can be used.