Assume that you just won the state lottery. Your prize can be taken either in the form of 440, 000 at the end of the next 25 years (i.e., $1, 000, 000 over 25 years) or as a single amount of $500, 000 paid immediately.

1. If you expect to earn 5% annually on your investments over the next 25 years, ignoring taxes and other considerations, which alternative should you take? Why?
2. Would your decision in part a change if you could earn 7% rather than 5% on your investments over the next 25 years? Why?
3. At approximately what interest rate would you be indifferent between the two options?