Congratulations! You Have Just Won the Lottery! However, the Lottery

question 153

Essay

Congratulations! You have just won the lottery! However, the lottery bureau has just informed you that you can take your winnings in one of two ways. Choice X pays $1,000,000. Choice Y pays $1,750,000 at the end of five years from now. Using a discount rate of 5 percent, based on present values, which would you choose? Using the same discount rate of 5 percent, based on future values, which would you choose? What do your results suggest as a general rule for approaching such problems? (Make your choices based purely on the time value of money.)

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Definitions:

Motivation

The driving force behind individuals' actions, desires, and needs to achieve goals.

Consistently

Displaying steadiness and uniformity in actions, values, methods, measures, principles, or outcomes.

Maslow's Hierarchy

Maslow's Hierarchy is a psychological theory that ranks human needs in a pyramid, from basic physiological needs to self-actualization, emphasizing the importance of fulfilling foundational needs first.

Love/Belonging

A psychological need involving emotional relationships with others, feeling part of a group, and experiencing love and friendship, which is crucial for human wellbeing.