9.18. You have just won the California state lottery! As the winner, you have a choice of three payoff programs. Assume the interest rate is 9 percent compounded annually: (1) a lump sum today of

$350,000 plus a lump sum 10 years from now of

$25,000; (2) a 20-year annuity of $42,500 beginning next year; and (3) a $35,000 sum each year beginning next year paid to you and your descendants (assume your family line will never die out).

a. Which choice is the most favorable?

b. How would your answer change if the interest rate assumption changes to 10 percent?

c. How would your answer change if the interest rate assumption changes to 11 percent?