Pat won a lottery with two options: $1 million per year, at the end of the year, for 25 years or a single cash price of $18 million. If low-risk investments can earn 2.5% compounded annually, which option should Pat choose and what is the advantage in terms of current economic value?

Select one:

A.

25 year annuity has an advantage of $424 000

B.

Lump sum has an advantage of $424 000

C.

25 year annuity has an advantage of $885 000

D.

Lump sum has an advantage of $885 000

E.

Both options are the