You Have Just Won a Lottery,which Offers a Choice in How

question 16

Multiple Choice

You have just won a lottery,which offers a choice in how you may receive your prize.If the interest rate is 10% per annum,compounded annually,which of the following prizes has the highest present value?

• A)$2 000 000 immediately
• B)an ordinary annuity of $300 000 per year for each of the next 10 years (starting one year from now)
• C)$3 000 000 at the end of five years
• D)$3 500 000 at the end of nine years
• E)a perpetuity of $250 000 per year starting one year from now

Explain the effects of interest rates on the economy, including the role of usury laws.

Understand the relationship between supply, demand, and pricing in various markets, including real estate and loanable funds.

Familiarize with the concept of economic profits versus accounting profits.

Assess the impact of usury laws on the availability and cost of loanable funds.

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Definitions:

Prestige Adornment

Objects or accessories worn that signify wealth, status, or authority, often made from precious materials and detailed craftsmanship.

Cloisonné

A decorative metalwork technique employing cloisons; also, decorative brickwork in later Byzantine architecture.

Book of Kells

An illuminated manuscript Gospel book in Latin, containing the four Gospels of the New Testament, known for its rich ornamental decoration, produced in medieval Ireland.

Medieval Irish Books

Illuminated manuscripts produced in Ireland during the medieval period, renowned for their intricate decoration and significant in the study of early Christian Irish culture.