Listed below are three lottery payout options.

$(Click$ the icon $to$ view the lottery payout options.$)$

Rather than compare the payout options $at$ their present values, compare the payout options $at$ their future value nine years from now.

$a.$ Using $a\frac{6}{\%}$ 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.

$E(Click$ the icon $to$ view the future value factor table.$)$

$(Click$ the icon $to$ view the future value annuity factor table.$)$

$(Click$ the icon $to$ view the present value factor table.$)$

$(Click$ the icon $to$ view the present value annuity factor table.$)$

$a.$ Using $a\frac{?}{(6\frac{?}{?}\%\frac{?}{?})}$ interest rate, what $is$ the future value $of$ each payout option?

Compute the future value $of$ each payout option. $(Round$ your answers $to$ the nearest whole dollar.$)$

Future value $of$ Option $1$

Future value $of$ Option $2$

Future value $of$ Option $3$

$b.$ Rank your preference among payout options.

Most preferable

Next preferable

Least preferable

$c.$ Does computing the future value rather than the present value $of$ the options change your preference between payout options? Explain.

$We$ can make a valid comparison between the payout options $,as$ long $aswe$ convert each payment option $to$ its value using the same interest rate. The preference among the options $we$ compare the options $at$ their present values $orat$ their future values.

Reference

Data table

Option $1$: $,$$$980,000$ now

Option $2$: $,$$$153,000at$ the end $of$ each year for the next nine years

Option $3$: $,$$$1,600,000$ nine years from now Reference