Question
Chuck has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $133,000 cash payment
Chuck has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $133,000 cash payment today. The second option is to receive $20,000 at the end of each of the next 19 years and a $33,500 lump sum payment in the 20th year. Chuck can invest money at a 11% 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 O decimal place, e.g. 58,971.)
Option 1
Option 2
Present value
Which option should Chuck choose to receive his winnings?
(b) If Chuck could invest money at 14%, 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?
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