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Suppose you have won a prize in a lottery. From the following prizes, you select the one with the largest present value (i.e. value now).
Suppose you have won a prize in a lottery. From the following prizes, you select the one with the largest present value (i.e. value now). Assuming an interest rate of 10% per annum compounded annually, you will choose a. a perpetuity of $100 per year, with the first payment to be made to you one year from now. b. an annuity of 5 yearly payments of $250 with the first payment to be made one year from now. O c. a perpetuity of $100, with the first payment to be made to you immediately. O d. an annuity of 5 yearly payments of $250 with the first payment made immediately
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