Congratulations! You have just won the lottery. The lottery board offers you three different options for collecting
Question:
Congratulations! You have just won the lottery. The lottery board offers you three different options for collecting your winnings:
1. You will receive payments of $500,000 at the end of each year for twenty years.
2. You will receive a lump-sum payment of $4,500,000 today.
3. You will receive a lump-sum payment of $1 million today and payments of $2,100,000 at the end of Years 5, 6, and 7.
Assume that all earnings can be invested at a 10 percent annual rate. Which option should you choose and why?
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Option 1 Present value 500000 x Present value factor for an ordinary annuity ...View the full answer
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