Recently, some lucky person won the lottery. The lottery winnings were reported to be $87.8 million. In reality, the winner got a choice of $3.67 million per year for 35 years or $49 million today.

 

 

Explain briefly why YOU think why winning the $3.67 million for 35 years is not equivalent to winning $87.8 million.

 

The evening news interviewed a group of people the day after the winner was announced. When asked, most of them responded that, if they were the lucky winner, they would take the $46 million up-front payment. Suppose (just for a moment) that you were that lucky winner. How would you decide between the annual installments or the up-front payment?