Question: Marty has just won the National Magazine Sweepstakes He has

Marty has just won the National Magazine Sweepstakes.
He has two options for receiving his prize. The first option is to accept a $125,000 cash payment today. The second option is to receive $15,000 at the end of each of the next 14 years and a $20,000 lump sum payment in the fifteenth year. Marty can invest money at a 6% rate.

a. Which option should Marty choose to receive his winnings? Why?
b. If Marty could invest money at 9%, which option should he choose? Why?

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  • CreatedFebruary 21, 2014
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