Question: Compare payout options at their future values (Learning Objective 3) Refer to the lottery payout options on page 486. Rather than compare the payout options

Compare payout options at their future values (Learning Objective 3)

Refer to the lottery payout options on page 486. 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 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.

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