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:

Dr.Strangelove

A satirical film directed by Stanley Kubrick that explores the themes of nuclear conflict and the absurdities of military and political systems.

Sleep Country USA

A retail chain specializing in mattresses and bedding products in the United States.

Nash Equilibrium

A concept in game theory where each player, knowing the strategies of the other players, has no incentive to change their own strategy.

AMD

Advanced Micro Devices, Inc., an American multinational semiconductor company known for its CPUs and GPUs for computers.