Recently, some lucky person won the lottery. The lottery winnings were reported to be $85.5 million. In reality, the winner got a choice of $2.85 million per year for 30 years or $46 million today.
a. Explain briefly why winning $2.85 million per year for 30 years is not equivalent to winning $85.5 million.
b. The evening news interviewed a group of people the day after the winner was announced. When asked, most of them responded that, if they were the lucky winner, they would take the $46 million up-front payment. Suppose (just for a moment) that you were that lucky winner. How would you decide between the annual installments or the up-front payment?

  • CreatedOctober 02, 2014
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