Assume that you just won the state lottery. Your prize can be taken either in the form of $ 72,000 at the end of each of the next 20 years ( that is $ 1,440,000over 20 years) or as a single amount of $ 840,000 paid immediatley

a) If you expect to be able to earn 5% annually on your investments over the next 20 years, ignoring taxes and other considerations, which alternative should you take? Why?

b) Would your decision in part a change if you could earn 7% rather than 5% on your investments over the next 20 years? why?

c) On a strictly economic basis, at approximately what earnings rate would you be indifferent between the two plans?