Present value of an annuity ch13

Suppose you win a small lottery and have the choice of two ways to be paid: You can accept the money in a lump sum or in a series of payments over time. If you pick the lump sum payout, you get $2, 950 today. If you pick the payments over time payout, you get three payments: $1,000 today, $1,000 one year from today, and $1,000 two years from today. At an interest rate of 8% per year, you would be better off accepting the payout since it has the greater present value. At an interest rate of 10% per year, you would be better off accepting the payout since it has the greater present value. Years after you win the lottery, a friend in another country calls to ask you she has just won another lottery with the same payout schemes. She must make a quick decision about whether to sum payout or the payments over time payout. What is the best advice to give your friend? The lump sum payout is always better. The payments over time payout is always better. It will depend on the interest rate; advise her to get a calculator. None of these answers is good advice