You just won the lottery! You have two choices for payout of your winnings. You can either choose a payment of $6 million in five years time, or a lump sum of $3.8 million right now.

c. At what simple interest rate would you be indifferent between the two options? To solve this problem, you may use the equation manipulation method, the trial and error method, or the Goal Seek function in MS Excel (under DataWhat-if-Analysis). If you choose to use trial and error method, try the rates between 11% and 12%, with 0.1% increments. If you choose to use Excel, ensure that you show your Excel formulas when presenting your answer. Marks will be deducted for incomplete or unclear answers.

d. At what compound interest rate would you be indifferent between the two options? To solve this problem, you may use either the equation manipulation method, the trial and error method or the Goal Seek function in MS Excel (under DataWhat-if-Analysis). If you choose to use trial and error method, try the rates between 9% and 10%, with 0.1% increments. If you choose to use Excel, ensure that you show your Excel formulas when presenting your answer. Marks will be deducted for incomplete or unclear answers.