Now its time for you to practice what youve learned.

Suppose that Bob just won the lottery and must choose between three award options:

1.	A lump sum of $40,000,000 received today
2.	15 end-of-year payments of $5,000,000
3.	40 end-of-year payments of $3,600,000

Assume the interest rate is 8.00%, entered as 8 on your financial calculator.

Note: Take the absolute value of the present value when answering this question.

Using a financial calculator yields a present value for option 2 of approximately ($42,797,393.44, $55,636,611.47,$29,958,175.41,$51,356,872.13) and a present value for option 3 of approximately ($38,635,747.20,$42,928,608.00,$47,221,468.80, $34,342,886.40) (when the interest rate is 8.00%). Based on this, Bob should choose option (3,1,2) if he seeks to maximize present value.

Now assume the interest rate is 9.00%, entered as 9 on your financial calculator.

Note: Take the absolute value of the present value when answering this question.

Using the table you just filled out and a financial calculator, yields a present value for option 2 of approximately ($52,394,474.80,$40,303,442.15,$48,364,130.58,$44,333,786.37) and a present value for option 3 of approximately ($30,981,197.36, $34,853,847.03,$42,599,146.37,$38,726,496.70) (when the interest rate is 9.00%). Based on this, Bob should choose option (2,1,3) if he seeks to maximize present value.

Assume the interest rate is 10.00%, entered as 10 on your financial calculator.

Note: Take the absolute value of the present value when answering this question.

Using the table you just filled out and a financial calculator, yields a present value for option 2 of approximately ($30,424,318.02, $26,621,278.27,$34,227,357.78, $38,030,397.53) and a present value for option 3 of approximately ($35,204,582.59, $45,765,957.37, $38,725,040.85,$42,245,499.11) (when the interest rate is 10.00%). Based on this, Bob should choose option (1,3,2) if he seeks to maximize present value.

As the interest rate increases, options 2 and 3 become (less/more) attractive, relative to option 1.