Value of an annuity versus a single amount Personal Finance Problem Assume that you just won the state lottery. Your priee can be taken either in the form of $96,000 at the end of each of the next 20 years (that is, $1,920,000 over 20 years) or as a single amount of $876,000 paid immectiately. a. If you expect to eam 8% anmualy on your investments over the next 20 yeart, ignoring taxes and other considerations, which allernative thould you take? Why? b. Would your decision in part a change if you could earn 10% raiher than 8% on your imvestments over the next 20 years? Why? c. Al approximately wiat interest rate would you be indifferent between the two options? a. To decide which alternative to take, you need to compare the values of these altematives. Alhough the toat nominal dollar amount of the annuity is mich larget than the single payment, the formor is not necessarly a better choioe due to the different liming of cash flows. A way to trake a meaningful comparision of the turo. alternatives is to corrpare their present values