Question: Suppose you win a raffle held at a county fair and are given the choice between two different ways to be paid. You can either

Suppose you win a raffle held at a county fair and are given the choice between two different ways to be paid. You can either accept the money in a lump sum immediately or in a series of payments over time. If you choose the lump sum payout, you receive $

3, 100

today. If you choose to collect payments over time, you receive three payments: $

1, 000

today, $

1, 0001

year from today, and $

1, 0002

years from today.

At an interest rate of

7 %

per year, the winner would be better off accepting the value.

,

since that choice has the greater present

At an interest rate of

9 %

per year, the winner would be better off accepting the payments over time grad, since it has the greater present value.

Suppose you win a raffle held at a county fair and

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