1. Suppose you win a lucky draw sponsored by Sands China and the prize is as high as MOP500,000. You

have also learned that you have two options to claim your fortune. In Plan A, the money is paid in equal

annual installments of MOP 100,000 over 5 years. As for Plan B, you may receive a one-time payment

of MOP 380,000. Sands China is in very good financial status and default risk is not a concern. Your

financial manager at Bank of China tells you that they provide risk-free investment product with an

annual return of 5%. Meanwhile, a small-business lending club in Shenzhen (China) offers junk bonds

with 15% APR.

Required:

1.1 Given the information above, what is the present value of Plan A? Please show your calculation

(6 points).

1.2 Given the conditions given in the question, which plan will you take? Why? Please give your brief

explanation. ( 4 points)