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John Won the Lottery on Monday and Can Take Either

question 133

Essay

John won the lottery on Monday and can take either $50,000 per year for 20 years,or $500,000 today.Bill won the same lottery on Tuesday and has the same options for receiving the cash.A well respected financial advisor is hired by both John and Bill.The advisor recommends that John take the $50,000 per year for 20 years but advises Bill to take the $500,000 up front payment.How is it possible to give different advice to two clients regarding the exact same cash flows?


Definitions:

AV Valves

Atrioventricular valves are valves in the heart that lie between the atria and the ventricles to prevent the backflow of blood during ventricular contraction.

Papillary Muscles

Muscular projections from the ventricular walls of the heart that attach to the cusps of the atrioventricular valves via the chordae tendineae and prevent valve inversion.

Regurgitation

The backward flow of blood through a valve in the heart due to the valve not closing properly, or the process of vomiting undigested food.

Cardiac Muscle Tissue

Tissue composed of cells that form the myocardium of the heart, responsible for the rhythmic contractions that pump blood.

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