Arturo won $1,000,000 in the lottery. He was given a choice to receive $300,000 in one-lump sum or $25,000 per year for 40 years.

Scenario 1: He would invest the $300,000 lump sum in a savings account that paid 1.75% interested compounded monthly for 40 years. How much money would he have after 40 years?

• (2 pts) Which formula is appropriate for this problem? (Simple Interest, Compound Interest, Savings Annuity, Payout Annuity, Monthly Payment on a Loan, Maximum Loan Amount, or one of the Mortgage-specific formulas, Future Value Needed (if making a one-time deposit), Future Value Needed (if making multiple deposits))
• (5 pts) How much money would he have after 40 years? Write out
  • 1) the correct formula with variables (e.g. P₀, P_N, N, r, etc.), and
  • 2) the correct formula with the numerical values (round your answer to the nearest cent), and
  • 3) write the answer in a complete sentence.