Author Question: Penny just won the state lottery that offers a choice of payments. She may opt for either receiving ... (Read 162 times)

joesmith1212 · **on:** Apr 25, 2021

Penny just won the state lottery that offers a choice of payments. She may opt for either receiving $1,000,000 today or $2,000,000 at the end of ten years. If she can invest her funds at 5% annually, which is the better choice?
◦ The later payment since $1,000,000 invested at 5% for ten years will be worth $1,500,000.
◦ The immediate payment since the present value of the $2,000,000 payment is $1,200,000.
◦ The earlier payment since the future value of $1,000,000 in ten years is $1,628,894.
◦ The earlier payment since the present value of the $2,000,000 payment is $876,000.
◦ The later payment since the present value of the $2,000,000 payment is $1,227,827.

kingfahad97 · **Reply #1 on:** Apr 25, 2021

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