Refer to the lottery payout options on page 693.
Option #1: $1,000,000 now
Option #2: $150,000 at the end of each year for the next 10 years
Option #3: $2,000,000 10 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 10 years from now.
a. Using an 8% 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.

  • CreatedApril 30, 2015
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