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0 a ng.cengage.com Homework (Ch 14) Dashboard CENGAGE I MINDTAP Homework (Ch 14) Back to Assignment MindTap - Cengage Learning Q Search this course CQ Jhoel v My Home Courses Catalog and Study Tools Rental Options College Success Tips Career Success Tips Help Give Feedback Attempts 2 1 Keep the Highest 2 / 3 3. Which lottery payout scheme is better? Suppose you win a small lottery and have the choice of two ways to be paid: You can accept the money in a lump sum or in a series of payments over time. If you pick the lump sum, you get $2,750 today. If you pick payments over time, you get three payments: $1,000 today, $1,000 1 year from A-Z today, and $1,000 2 years from today. At an interest rate of 9% per year, the winner would be better off accepting the value. At an interest rate of 11% per year, the winner would be better off accepting , since that choice has the greater present , since it has the greater present value. Years after you win the lottery, a friend in another country calls to ask your advice. By wild coincidence, she has just won another lottery with the same payout schemes. She must make a quick decision about whether to collect her money under the lump sum or the payments over time. What is the best advice to give your friend? O The lump sum is always better. The payments over time are always better. O It will depend on the interest rate; advise her to get a calculator. None of these answers is good advice. Grade It Now Save & Continue Continue without saving