Jack and Jill have been together for many years. While vacationing in Niagara Falls, Ontario, Jill won a prize at the Casino and was presented with the following options:

i) Receive $10,000 in 1 year

ii) Receive $20,000 in 5 years

iii) Receive $30,000 in 10 years

Assume Jill does not need the money today and will be able to collect it.

Required:

1. If interest rates are 10% p.a., which option should Jill select? (5 marks)
2. If interest rates are 20% p.a., which option should Jill select? (5 marks)
3. Assume Jill is offered another option; $15,000 today, or $1,000 per year for the next 30 years. If interest rates are 6% p.a., which option should Jill select? (5 marks)