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:

Index Funds

Mutual funds or exchange-traded funds (ETFs) designed to follow certain preset rules so that the fund can track a specified basket of underlying investments.

PHStat

An Excel-based statistical analysis software package designed to make the understanding and application of statistics easier for users.

Decision Nodes

Points within a decision-making process or decision tree where choices between different actions must be made.

Event Nodes

Elements in a graph or network representing moments or occurrences, often used in event-driven modeling or decision analysis.