Question: Chuck has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $200,000 cash payment

Chuck has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $200,000 cash payment today. The second option is to receive $20,000 at the end of each of the next 19 years and a $50,000 lump sum payment in the twentieth year. Chuck can invest money at a 5% rate.

Required

a. Which option should Chuck choose to receive his winnings? Why?

b. If Chuck could invest money at 9%, which option should he choose? Why?

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