# Listed below are three lottery payout options. Option 1: $ 975,000 now Option 2: $ 153,000 at

## Question:

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.

Future Value

Future value (FV) is the value of a current asset at a future date based on an assumed rate of growth. The future value (FV) is important to investors and financial planners as they use it to estimate how much an investment made today will be worth...

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