Asked by Samuel Flores on Jun 12, 2024
Verified
You win a lottery that pays $50,000 each year for the next 10 years beginning next year. How much are your winnings worth today?
A) $0
B) $50,000
C) $500,000
D) indeterminate with the given information
Lottery
A lottery is a form of gambling that involves drawing numbers at random for a prize, often administered by state or federal governments.
Winnings
The amount of money or prizes won in a game or competition.
Worth Today
The present value of an amount of money in relation to its value in the future, considering factors like inflation and interest rates.
- Calculate the present value of an annuity.
Verified Answer
SF
Stephany FigueroaJun 18, 2024
Final Answer :
D
Explanation :
The value of the winnings today cannot be determined without knowing the discount rate or interest rate to calculate the present value of the annuity (the series of $50,000 payments).
Learning Objectives
- Calculate the present value of an annuity.