Rachel and Fred are lottery winners! They hold the ticket to the grand prize, which is 20 consecutive annual payments of $50,000 beginning immediately. Fred looks at Rachel and says ...can you believe it? Weve just become millionaires. Are they really? Assume an interest rate of 5%. Is Rachel and Freds prize worth more or less when it is paid in the form of an annuity due? Why?

Again, the prize is 20 consecutive annual payments of $50,000 beginning immediately. Jack and Diane decide to wait to spend the money and so they invest all amounts in a bank to earn an interest rate of 5%. How much will they have at the end of year 20?