You win a jackpot of $1,000,000 from the MI lottery. Which should you take? State your assumptions and show your calculations.

Option 1 (cash flow diagram and total amount 10 pt)

The lottery rules say that total will be paid out to you in 20 equal annual payments of $50,000 each. You will invest this money at 5% interest per year.

Option 2 (cash flow diagram and total amount 10 pt)

Alternatively, you can take the lump sum cash value, which is about $500,000 that you will also invest at 5% each year.