Listed below are three lottery payout options.
Option 1: $ 975,000 now
Option 2: $ 153,000 at the end of each year for the next nine years
Option 3: $ 1,550,000 nine years from now
Rather than compare the payout options at their present values (as is done in the chapter), compare the payout options at their future value ten years from now.
a. Using an 6% interest rate, what is the future value of each payout option?
b. Rank your preference of payout options.
c. Does computing the future value rather than the present value of the options change your preference of payout options? Explain.