Suppose you win a lottery. You have two choices for receiving the money. Choice 1: $50 000 at the end of each year for 20 years Choice 2: $500,000 now If current interest rates are approximately 8% p. a. compounded yearly, which is the better choice. Justify your answer with a clear solution and explanation.

The first option of an annuity is better because the amount is worth   $2,288,098 in today's cash

Explanation:

The better choice would be the option with the higher present value discounted at the required rate of return. The required rate of return is 8%.

To determine the better choice, we would compare the present value of choice 1 to the $500, 000 receivable today under choice 2

The present value of $50 000 at the end of each year for 20 years is

PV = A × ((1+r)^n - 1)/r

r- 8%, n - 20, A= 50,000, PV - Present value

PV = 50,000 × (  ( 1.08)^(20) - 1) /0.08

     =  50,000 ×  45.7619643

     =  $2,288,098

The first option of an annuity is better because the amount is worth   $2,288,098 in today's cash which is higher than $500,000 offered by the second option.

The first option is greater than the second by $1,788,098.21  i.e

$2,288,098 - $500,000

d,

answer: a. the kind of population living in your neighbourhood.

the census explorer data tool by the us census bureau allows the user to zoom in on any neighbourhood within the united states and find the kind of people residing in that by race and age.  

the tool needs to needs to be used twice – once in order to find what type of people reside in a neighbourhood, and then to see the age groups of the people in the same neighbourhood.