Assume that you are a plaintiff and have won a structured settlement from a lawsuit that entitles you to $1 million each year over the next ten years
An attorney from the defense team approaches you afterward and offers you $6 million in exchange for your settlement. How would you go about evaluating whether this is a good deal for you or not?
You would first have to determine what the present value of each $1 million installment is worth by figuring out what rate of return you could reasonable expected to earn. This becomes your discount rate. Once you have calculated the present value of each of these $1 million installments over the next ten years you simply add them up. If they sum to less than $6 million then you should take the cash payment. If not then you should stay with your structured settlement.
You might also like to view...
An increase in the money wage rate leads to
A) a rightward shift of the aggregate supply curve. B) a downward movement along the aggregate supply curve. C) an upward movement along the aggregate supply curve. D) a leftward shift of the aggregate demand curve. E) a leftward shift of the aggregate supply curve.
Refer to Table 3-3. The table above shows the demand schedules for Kona coffee of two individuals (Luke and Ravi) and the rest of the market. At a price of $4, the quantity demanded in the market would be
A) 40 lbs. B) 70 lbs. C) 110 lbs. D) 150 lbs.
Suppose that the economy has a structural surplus of $100 billion and is operating above potential output. From this we can infer that the budget as a whole:
A. is in surplus. B. is in deficit. C. could be in deficit or surplus depending on the size of the cyclical deficit. D. is balanced.
Firms that help corporations and governments raise money by selling stocks and bonds are known as:
A. investment banks B. thrifts C. mutual fund companies D. insurance companies