Gabrielle just won

$2

million in the state lottery. She is given the option of receiving a of

$1,000,000

now, or she can elect to receive

$80,000

at the end of each of the next

25

years. If Gabrielle can earn

5%

annually on her investments, which option should she take?

Question content area bottom

Part 1

If Gabrielle takes the prize as an annuity, the present value of the

25-year

ordinary annuity is

$enter your response here.

(Round to the nearest dollar.)

Part 2

If Gabrielle takes the prize as a single amount, the present value of the lump sum is

$enter your response here.

(Round to the nearest dollar.)

Part 3

Which alternative should be chosen? (Select the best answer below.)

A.Annuity payments

Annuity payments

B.Lump sum payment