Question

Most state lotteries in the U.S. give Lottery winners of particularly large prizes the option of taking the total prize as an annuity over several years, usually 10-20, or as a discounted lump sum now. Based on what we are studying this week and your prior knowledge and research, what are the various factors that should be considered in choosing either alternative if the goal is to maximize the total benefit to the Lottery winner? What are the risks associated with each alternative? The text presents a mathematical relationship between present value and future value. What does this relationship suggest to potential investors as far as setting important priorities? What is the most important determinant of meeting retirement goals?

Please post articles that relate to topics, themes and issues discussed in this week's readings, and provide some thoughts and observations on the articles' contents.

Answer 1

Answer:  

The different variables to be considered are

1. Regardless of whether the speculator needs to utilize the cash now or needs it after some time to meet his yearly necessities

2. Figuring the present estimation of both the singular amount and the annuity to recognize which bodes well

3. The capacity of the financial specialist or champ to contribute the cash acquired to get expansion ensured returns.

The dangers related with singular amount are: the lower an incentive in the event that the rebate rate is high, financial specialist not recognizing what to do with such extensive total, loss of money related estimation of the single amount over years because of swelling.

The hazard related with annuity, is the capacity of the state lottery to pay annuities more than quite a while, consider the possibility that the annuity is low throughout the years and it bodes well to take a singular amount.

The scientific connection among PV and FV is

PV = FV/(1+r)^n where PV = Present vale, FV = future esteem , r is the rebate factor and n is the quantity of years.

The relationship proposes that financial specialists should take a gander at the markdown factor. In the event that it high, the present esteem would be low and the other way around.

The vital determinant in retirement objective is the manner by which quick you can aggregate a bigger corpus which implies you have to get an annualized return which is as high as could reasonably be expected.