Geraldo recently won a lottery and chose to receive $100,000 today instead of an equivalent amount in 10 years, computed using an 8 percent rate of return. today, he learned that interest rates are expected to increase in the future. use exhibit 3.1. is this good news for geraldo given his decision?

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Noel Lara

Business

13 October, 05:09

Geraldo recently won a lottery and chose to receive $100,000 today instead of an equivalent amount in 10 years, computed using an 8 percent rate of return. today, he learned that interest rates are expected to increase in the future. use exhibit 3.1. is this good news for geraldo given his decision?

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Rhys Klein · Answer 1

This is good news for Geraldo's choice. On the off chance that Geraldo deferred the $100,000 at a 8 percent interest rate, the expansion in loan fees would have lessened the present estimation of the lottery rewards. The proportionate sum in 10 years at 8 percent is roughly $216,000. In the event that this sum was discounted back to display an incentive at 10 percent (rather than 8 percent), the present esteem would be just about $83,000.