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:

Republicans

Members of the Republican Party, one of the two major political parties in the United States, often associated with conservative policies and positions on issues like taxation, national defense, and business regulation.

Westward Expansion

the 19th-century movement of settlers into the American West, encouraged by ideology, government policy, and opportunities for new land and wealth.

National Resources

Natural resources such as minerals, forests, water, and fertile land that belong to or are characteristic of a particular country.

Democratic Societies

Democratic societies are systems of governance where power is vested in the population and decisions are made by majority rule, often characterized by free and fair elections, protection of human rights, and equal treatment under the law.