Pat Won a Lottery with Two Options: $1 Million Per

question 39

Multiple Choice

Pat won a lottery with two options: $1 million per year, at the beginning of the year, for 25 years or a single cash price of $18 million. If low-risk investments can earn 2.5% compounded annually, which option should Pat choose and what is the advantage in terms of current economic value?

• A) Lump sum has an advantage of $885 000
• B) 25 year annuity has an advantage of $885 000
• C) 25 year annuity has an advantage of $424 000
• D) Lump sum has an advantage of $424 000
• E) Both options are the same

Define resilience and describe methods to foster its development.

Understand the concept of overhead application in costing, including the treatment of overapplied and underapplied overhead.

Comprehend the features, benefits, and limitations of job order production.

Recognize the role of cost accounting systems in accumulating and assigning costs to products or services.

---

Definitions:

Money Supply

The entirety of monetary resources accessible in an economy during a specific period.

Rational

Characterized by clear and logical thinking, often with regard to fulfilling one's personal goals or making decisions based on empirical evidence and reasoning.

Unemotional Self-interest

Refers to actions motivated purely by personal gain without regard to emotions or moral considerations.

Q

Generally denotes quantity in economic and mathematical models, referring to the amount of goods or services.