The concept that timing of the receipt of cash affects it is demonstrated by present and future value. These values are based on several variables: the amount of cash, whether it is a one-time payment, a series of equal payments, or unequal payments, and when the cash is received. The interest rate is another variable that has a very large effect on the present and future values. Use these concepts to answer why a lottery winner would choose to take their winnings as a lump sum today instead of receiving more cash if they took their winnings as a series of payments over a number of years. Provide numerical examples based on winning the lottery. You will have to design the examples yourself. Use a discount rate of 4% and payoff period of 30 years

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Sure heres an example to demonstrate why a lottery winner might choose to take their winnings as a lump sum today instead of receiving more cash over ... View the full answer