A Lottery Winner Can Take $6 Million Now or Be

question 13

Multiple Choice

A lottery winner can take $6 million now or be paid $600,000 at the end of each of the next 16 years.The winner calculates the internal rate of return (IRR) of taking the money at the end of each year and,estimating that the discount rate across this period will be 6%,decides to take the money at the end of each year.Was her decision correct?

• A)Yes,because it agrees with the Net Present Value rule.
• B)Yes,because it agrees with the payback rule.
• C)Yes,because it agrees with both the Net Present Value rule and the payback rule.
• D)No,because it disagrees with the Net Present Value rule.

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Definitions:

Malnutrition

A condition that results from eating a diet in which one or more nutrients are either not enough or are too much, leading to health problems.

Obesity

A medical condition characterized by excessive body fat accumulation, which poses a risk to health.

Lack of Health Insurance

The absence of healthcare coverage, which can result in limited access to medical services and financial hardship due to medical expenses.

Ill Health

A state of poor physical or mental condition; not being well.