Steve Coleman Has Just Won the State Lottery and Has

question 69

Multiple Choice

Steve Coleman has just won the state lottery and has the following three payout options for after-tax prize money: 1.$166,000 per year at the end of each of the next six years
2) $304,000 (lump sum) now
3) $504,000 (lump sum) six years from now
The annual discount rate is 9%.Compute the present value of the second option.(Round to nearest whole dollar.)
Present value of $1:
$$\begin{array} { | l | r | r | r | } \hline & 8 \% & 9 \% & 10 \% \\\hline 1 & 0.926 & 0.917 & 0.909 \\\hline 2 & 0.857 & 0.842 & 0.826 \\\hline 3 & 0.794 & 0.772 & 0.751 \\\hline 4 & 0.735 & 0.708 & 0.683 \\\hline 5 & 0.681 & 0.650 & 0.621 \\\hline 6 & 0.630 & 0.596 & 0.564 \\\hline 7 & 0.583 & 0.547 & 0.513 \\\hline\end{array}$$

• A) $670,000
• B) $100,800
• C) $403,200
• D) $304,000

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Definitions:

Dissociation

A psychological condition in which there is a disconnection or lack of continuity between thoughts, memories, surroundings, actions, or identity.

Simultaneously

Occurring, operating, or done at the same time.

Susceptibility

The likelihood or predisposition of an individual to be affected by a certain disease or condition.

Hypnosis

A trance-like state characterized by increased focus, concentration, and suggestibility, often used for therapeutic purposes.