Kristina just won the lottery, and she must choose among three award options. She can elect to receive a lump sum today of $62 m
illion, to receive 10 end-of-year payments of $9.5 million, or to receive 30 end-of-year payments of $5.6 million.
(a) If she thinks she can earn 7% annually, which should she choose?
(b) If she expects to earn 8% annually, which is the best choice?
(c) If she expects to earn 9% annually, which option would you recommend?
(d) Explain how interest rates influence her choice.
(a) If she thinks she can earn 7% annually, which should she choose?
(b) If she expects to earn 8% annually, which is the best choice?
(c) If she expects to earn 9% annually, which option would you recommend?
(d) Explain how interest rates influence her choice.
1 answer:
Answer:
a. Best deal is 30 end-of-year payments of $5.6 million
b. Best deal is 10 end-of-year payments of $9.5 million
c. Best deal is lump sum today of $62 million
Explanation:
Please see attachment for workings.
d. As the interest rate increases, the duration of value shortens. That is as the interest rate increases, the best choose based on their payment duration reduces
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When the supply of a commodity decreases while demand remains same then the same price tends to increase.
Given that the supply of a commodity decreases while the demand remains same.
We are required to find the effect of decrease of supply on the price of the commodity if the demand remains same.
Supply is the amount of good that the producer manufactures and sends to the market.
Demand is the amount of good that the consumer wants to consume.
When the supply of a commodity decreases,the supply will shift leftwards. The demand remains same then from the graph we can find that the price of the commodity increases from P to P1.
Hence when the supply of a commodity decreases while demand remains same then the same price tends to increase.
Learn more about supply at brainly.com/question/25843620
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