Your Girlfriend Just Won the Florida Lottery

question 135

Multiple Choice

Your girlfriend just won the Florida lottery.She has the choice of $10,800,000 today or a 20-year annuity of $1,050,000,with the first payment coming one year from today.What rate of return is built into the annuity? Disregard taxes.

• A) 8.71%
• B) 7.60%
• C) 5.69%
• D) 7.38%
• E) 6.57%

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Definitions:

Gauge

An instrument or tool used to measure, test, or visually compare physical characteristics such as dimensions, thickness, or depth.

Spur Gears

Cylindrical gears with teeth projecting radially and having edges parallel to the axis, used to transmit motion between parallel shafts in machinery.

Pinion

A small gear that engages with a larger gear or rack, often used to convert rotational motion to linear motion or vice versa.

Mechanical Advantage

The factor by which a mechanism multiplies the force put into it, enabling the lifting or moving of heavier loads with less effort.