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Congratulations! As winner of the DC lottery, you can choose one of the following prizes: A: $1,000,000 today B: $225,000 today and for each of
Congratulations! As winner of the DC lottery, you can choose one of the following prizes:
A: $1,000,000 today
B: $225,000 today and for each of the next 4 years
C: $150,000 today and $50,000 per half-year for the next 15 years
D: $100,000 today and $15,000 per quarter next period until forever
If the interest rate is 7%, which of the above will you choose? If you were the Director of
Lottery in charge of lottery payments, which of the above will you prefer? Why?
Show specific calculations for each scenario (A-D), i.e. show all steps. Do not round.
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