Question
14) You win an OLG scratch lottery today and are presented with the following three options to receive your prize. (6 marks total) Option A:
14) You win an OLG scratch lottery today and are presented with the following three options to receive your prize. (6 marks total)
Option A: $11,000 end of quarter payments for 10 years.
Option B: A lump sum payment of $170,000 today and another lump sum payment of $250,000 in 2 years from today
Option C: $4,900 beginning of the month payments for 12 years BUT starting in exactly 8 years from today. (Deferred Annuity)
Discount the Cash Flows (DCF) of each one to determine which one is the highest, if interest rates are 4% compounded annually?
14a) DCF for Option A
14b) DCF for Option B
14c) DCF for Option C
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