1. Depreciting Value / time value 2.interest / principle / effort 3. norm value

Question

1. Depreciting Value / time value

2.interest / principle / effort

3. norm value / present value / dollar value

b.)

1. present value / future value / nominal value

2. exchange rate / interest rate / inflation rate

Recently, some lucky person won the lottery. The lottery winnings were reported to be S85.5 million. In reality, the winner got a choice of $2.85 million per year for 30 years or $46 million today a. Explain briefly why winning $2.85 million per year for 30 years is not equivalent to winning S85.5 million. $2.85 million per year for 30 years is not equivalent to winning $85.5 million because of the (Click to select) | of money. With the annual payments over 30 years, you don't receive most of the money until some time in the future, and so the value is less because of foregone (Click to select) . The equivalent today of the annual payments over thirty years is the sum of the Click to select) of the sequence of payments years is the sum of the (Click to select) | of the sequence of payments b. The evening news interviewed a group of people the day after the winner was announced. When asked, most of them responded that, if they were the lucky winner, they would take the $46 million up-front payment. Suppose (just for a moment) that you were that lucky winner. How would you decide between the annual installments or the up-front payment? I would compare the (Click to select" of the installments over 30 years using an appropriate Click to select" from the market with $46 million to see which option represented the highest present value

Explanation / Answer

a.) 1. time value of money.

2.interest.

3. present values.

b.) 1. present value.

2. interest rate.

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