select the correct answer.\nkim just won the $1 million lottery. she has two choices for how she can receive…

select the correct answer.\nkim just won the $1 million lottery. she has two choices for how she can receive her winnings. she can either get a lump sum payment of $630,000 today (after taxes), or she can receive her $1 million winnings in equal yearly payments for 20 years.\nwhich of the following actions should kim take that would make the best use of her winnings long term?\na. accept the lump sum payment and deposit it into a savings account.\nb. accept the yearly payments and invest in bonds each year.\nc. accept the lump sum payment and invest it in a diversified portfolio.\nd. accept the yearly payments and deposit the payments into a savings account.

select the correct answer.\nkim just won the $1 million lottery. she has two choices for how she can receive her winnings. she can either get a lump sum payment of $630,000 today (after taxes), or she can receive her $1 million winnings in equal yearly payments for 20 years.\nwhich of the following actions should kim take that would make the best use of her winnings long term?\na. accept the lump sum payment and deposit it into a savings account.\nb. accept the yearly payments and invest in bonds each year.\nc. accept the lump sum payment and invest it in a diversified portfolio.\nd. accept the yearly payments and deposit the payments into a savings account.

Answer

Brief Explanations:

To determine the best long - term use of the lottery winnings, we need to consider the time value of money and investment returns. A diversified portfolio typically has the potential for higher returns over the long term compared to a savings account (which has relatively low - return rates). Also, the lump - sum payment of $630,000, when invested in a diversified portfolio, can grow over 20 years. The yearly payments option, if invested in bonds or a savings account, will likely not yield as high a return as a diversified portfolio with the lump sum. Option A (savings account) has low returns. Option B (yearly payments + bonds) and D (yearly payments + savings) will have lower growth potential than investing the lump sum in a diversified portfolio.

Answer:

C. Accept the lump sum payment and invest it in a diversified portfolio.