The Fair and Equitable Tobacco Reform Act of 2004 ended the depression era tobacco quota program and established the Tobacco Transition Payment Program (TTPP). This program was intended to help producers and quota holders transition to a free market system. TTPP is also known as the "Tobacco Buyout." Eligible producers and quota holders were given a choice of how they wanted to receive their "buyout." They could receive 10 annual payments from 2005-2014. Or, they could swap their annual payments with a financial institution and receive a lump sum in the amount of about 80% of the total income stream. Some producers/quota holders asked why they would not be the same amount.

Using what you have learned in this class (economic and financial principles), explain why the 10 annual payments and the lump sum payment would not be the same.