and

Suppose you just won a lottery. You could either choose to get a quarterly payment of $5000 for 10 years, with the first payment 1 year from today; or you can choose to get a lump sum of $130,000 today. Suppose the applicable interest rate is an APR of 8%, compounded quarterly. Which option should you choose? Why? Choose the first option (quarterly payment) because it offers a larger total amount of $500040=$200,000. Choose the second option (lump sum payment) because the present value of the first option is $128,888, which is lower than $130,000 today. Choose the first option (quarterly payment) because the present value of the first option is $136,777, which is higher than $130,000 today. Choose the second option (lump sum payment) because the present value of the first option is $126,361, which is lower than $130,000 today. Indifferent between the two options because they provide the same present value today