Suppose you win a grand lottery on January 1, 2015. You can choose to receive the entire amount of $200 million either as a lump sum on January 1, 2015, or you can receive four equal payments of $52 million paid on January 1, 2015, 2016, 2017, and 2018. Assume your lottery earnings are not taxed.

a. How would you decide which option to choose? Assume the interest rate to be 3 percent.

b. Suppose that the interest rate is 2 percent. Would your answer to part

(a) change?