Felice Lucas Has Just Won the State Lottery and Has

question 11

Multiple Choice

Felice Lucas has just won the state lottery and has the following three payout options for after-tax prize money: 1. $170,000 per year at the end of each of the next six years
2) $312,000 (lump sum) now
3) $508,000 (lump sum) six years from now
The annual discount rate is 9%. Compute the present value of the first option. (Round your answer to the nearest whole dollar.)
Present value of an ordinary annuity of $1:
$$\begin{array} { | r | r | r | r | } \hline & 8 \% & 9 \% & 10 \% \\\hline 1 & 0.926 & 0.917 & 0.909 \\\hline 2 & 1.783 & 1.759 & 1.736 \\\hline 3 & 2.577 & 2.531 & 2.487 \\\hline 4 & 3.312 & 3.240 & 3.170 \\\hline 5 & 3.993 & 3.890 & 3.791 \\\hline 6 & 4.623 & 4.486 & 4.355 \\\hline 7 & 5.206 & 5.033 & 4.868 \\\hline\end{array}$$ Present value of $1:
$$\begin{array} { | c | r | r | r | } \hline & 8 \% & 9 \% & 10 \% \\\hline 1 & 0.926 & 0.917 & 0.909 \\\hline 2 & 0.857 & 0.842 & 0.826 \\\hline 3 & 0.794 & 0.772 & 0.751 \\\hline 4 & 0.735 & 0.708 & 0.683 \\\hline 5 & 0.681 & 0.650 & 0.621 \\\hline 6 & 0.630 & 0.596 & 0.564 \\\hline 7 & 0.583 & 0.547 & 0.513 \\\hline\end{array}$$

• A) $850,000
• B) $762,620
• C) $482,000
• D) $457,251

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Definitions:

Extroversion

A personality trait characterized by sociability, talkativeness, assertiveness, and high levels of energy and enthusiasm.

Generativity

A concern for establishing and guiding the next generation, often observed in middle adulthood.

Caregiving

The activity or profession of regularly looking after a child or a sick, elderly, or disabled person, often involving emotional and physical support.

Parenthood

The state or experience of having and raising a child, involving responsibilities such as care, love, and guidance.