Question
Chuck has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $126,000 cash payment
Chuck has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $126,000 cash payment today. The second option is to receive $18,900 at the end of each of the next 15 years and a $25,000 lump sum payment in the 16th year. Chuck can invest money at a 6% 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 | |||
Present value | $ | $ |
Which option should Chuck choose to receive his winnings?
Option 2Option 1 |
(b) If Chuck could invest money at 9%, 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 |
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