QUESTION 1

1. You won a lottery. There are two payment options: either you get $100,000 immediately, or you can receive $111,000 two years later. If your savings account provides a 6% annual rate compounded monthly, which alternative should you choose? (Assume no default risk.) (hint: use monthly interest rate of 6%/12 =0.5%) (hint: You will get partial credit even if your final answer is wrong but you give the correct procedures. No credit will be given if all intermediate steps are missed).