a. Alex Meir recently won a lottery and has the option of receiving one of the following

Question:

a. Alex Meir recently won a lottery and has the option of receiving one of the following three prizes:

(1) $92,000 cash immediately,

(2) $36,000 cash immediately and a six-period annuity of $95,000 beginning one year from today,

(3) A six-period annuity of $18,600 beginning one year from today.

Assuming an interest rate of 6%, determine the PV value for the above option?

b. Which option should Alex choose?

1. Option 1

2. Option 2

3. Option 3

Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,...