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vu may use scratch paper, a pen/pencil, and a calculator (or calculators) while working on the exam. You are NOT allowed to use any other
vu may use scratch paper, a pen/pencil, and a calculator (or calculators) while working on the exam. You are NOT allowed to use any other Lurces, including the eBook, homework, Problem Set, or any other notes/materials. Luck Question 1 24 pts Taylor just won a scratch-off prize of $48,000. The lottery commission offers her an annuity of $12,000 per year for the next four years, or a lump sum payment of $35,000 today. At her current required return, Taylor calculates that the annuity is the better option. However, before making her final choice, Taylor's cousin provides her with a hot stock tip that increases her required return substantially. Should Taylor reconsider her choice? Why or why not? No, Taylor should not reconsider. The present value of the annuity option will increase with higher required return No, Taylor should not reconsider. The value of both options is unchanged Yes, Taylor should reconsider. The present value of the annuity option will decrease with higher required return Yes, Taylor should reconsider. The present value of the lump sum payment option has increased with higher required return Question 2
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