ACC-650 TOPIC 6 Assignment

Question 3 of 12

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Edward has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $125,000 cash payment today. The second option is to receive $21,600 at the end of each of the next 19 years and a $21,200 lump sum payment in the 20th year. Edward can invest money at a 9% rate. Click here to view the factor table. (a) Calculate the present value of the two options. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971.)

Option 1		Option 2

Option 1Option 2

(b) If Edward could invest money at 12%, calculate the present value of the two options. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971.)

		Option 1		Option 2
Present value		$		$

Which option should he choose?

Option 2Option 1