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timama [110]
3 years ago
15

Suppose you win a small lottery and have the choice of two ways to be paid: You can accept the money in a lump sum or in a serie

s of payments over time. If you pick the lump sum, you get $2,850 today. If you pick payments over time, you get three payments: $1,000 today, $1,000 1 year from today, and $1,000 2 years from today. At an interest rate of 9% per year, the winner would be better off accepting the , since that choice has the greater present value. At an interest rate of 11% per year, the winner would be better off accepting , since it has the greater present value. Years after you win the lottery, a friend in another country calls to ask your advice. By wild coincidence, she has just won another lottery with the same payout schemes. She must make a quick decision about whether to collect her money under the lump sum or the payments over time. What is the best advice to give your friend? The lump sum is always better. The payments over time are always better. It will depend on the interest rate; advise her to get a calculator. None of these answers is good advice.
Business
1 answer:
Paraphin [41]3 years ago
5 0

Answer:

The correct answer would be option A, The lump sum is always better.

Explanation:

If I would have to give advice to my friend who is in the same situation as i was in some time back, I would recommend him to go for the Lump sum choice. This is because of the fact that the interest rate compounded in three years payment schedule will result in the less value of what I am getting today. Accepting the lump sum value in contrast with accepting the yearly payments on 9% interest rate would be better off because it has more value at present.

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Mandatory spending is something that either has, or is strongly urged to be done. Discretionary spending is based on the spenders discretion, if the spender thinks it needs to be spent, then they would do so. Example of mandatory spending would be paying back a loan. Example of discretionary spending would be a good business investment.  Hope this helps!
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3 years ago
Which of the following questions is the most appropriate way for a retail associate to understand if a customer prefers inexpens
Aleonysh [2.5K]

Answer:

"What clothing brands do you usually prefer?"

Explanation:

The retail salesman will infer if the customer likes expensive or cheap brands as this person is trained to know the difference in prices of all the brands that the branch sells.

4 0
2 years ago
If the interest rate in the United Kingdom is 8 percent, the interest rate in the United States is 10 percent, the spot exchange
NISA [10]

Answer:

The answer is $1.78 / £1

Explanation:

Solution

Given that

Interest rate of United kingdom = 8%

Interest rate of United States =10%

Spot exchange rate =$1.75£1

The next step is to find the one year forward rate of exchange

Thus

Forward Rate = S₀ * [ ( 1 + Rus) / ( 1 + RE) ]

=$ 1.75 * ( ( 1 + 10%) / ( 1 + 8%) )

$1.78

Therefore, the forward exchange rate is $ 1.78 / £1

3 0
3 years ago
Boeing and airbus both had to make difficult decisions to address ethical missteps. Airbus’ decision to dismiss over 100 employe
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Boeing and Airbus both had to make difficult decisions to address ethical missteps. Airbus’ decision to dismiss over 100 employees due to ethics and compliance reasons is tied to Decision making as a managerial role.

The role stated in Decision Making as a managerial role in the given question is Disturbance Handler.

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6 0
1 year ago
ou are comparing two mutually exclusive projects. The crossover point is 12.3 percent. You have determined that you should accep
Verdich [7]

Answer:

the options are missing:

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  2. Accept Project B if the required return is less than 13.1 percent.
  3. Be indifferent to the projects at any discount rate above 13.1 percent.
  4. Accept Project B only when the required return is equal to the crossover rate.
  5. Always accept Project A if the required return exceeds the crossover rate.

the answer is:

5. Always accept Project A if the required return exceeds the crossover rate.

The crossover point tells us that one project must be chosen if the IRR is higher than the cross over point, but if the IRR is lower, then the other alternative should be selected.

In this case, the cross over point is 12.3% and we are told that project A should be selected if the required IRR is 13.1%. That tells us that the alternative that we must choose above 12.3% is project A. Project B should be selected if the IRR is less than 12.3%.

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