You Won the Lottery and Can Receive Either (1)$60,000 Today,or

question 99

Multiple Choice

You won the lottery and can receive either (1) $60,000 today,or (2) $10,000 one year from today plus $25,000 two years from today plus $35,000 three years from today.You plan to use the money to pay for your child's college education in 15 years.You should

• A) take the $60,000 today because of the time value of money regardless of current interest rates.
• B) take option two because you get $70,000 rather than $60,000 regardless of current interest rates.
• C) take the $60,000 today only if the current interest rate is at least 16.67%.
• D) take the $60,000 today if you can earn 6.81% per year or more on your investments.

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Definitions:

Competitive Bidding

A procurement process where suppliers submit bids to win a contract, ensuring transparency and fairness while possibly lowering costs.

Offer Price

The price at which a seller is willing to sell a security or asset, often differing from the bid or purchase price offered by a buyer.

Underwriters

Financial specialists who assess and take on certain risks by guaranteeing to pay a certain amount for securities offered by a corporation or government.

Best-efforts Offering

A type of securities underwriting where the underwriter agrees to sell as much of the offering as possible, but not to purchase the securities outright.