Question
Robert has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $125,000 cash payment
Robert has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $125,000 cash payment today. The second option is to receive $21,500 at the end of each of the next 19 years and a $20,500 lump sum payment in the 20th year. Robert can invest money at a 7% rate. Click here to view the factor table. (a) Calculate the present value of the two options.
Which option should Robert choose to receive his winnings?
(b) If Robert could invest money at 10%, calculate the present value of the two options.
Which option should he choose? (b) If Robert could invest money at 10%, calculate the present value of the two options.
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