Yuma, Arizona resident Rosalind Setchfield won $1.3 million in an Arizona lottery drawing, to be paid in 20 annual installments of $65,277. However, her husband, a construction worker, suffered serious injuries when a crane dropped a heavy beam on him. The couple's medical expenses and debt mounted. Six years later, in early 1995, a prize broker from Singer Asset Finance Co. telephoned Mrs. Setchfield with a promising offer. Singer would immediately give her $140,000 for one-half of each of her next nine prize checks (1/2 × 9 × $65,277 = $293.746), an amount equal to 48% of the $293,746 she had coming over that period. A big lump sum had obvious appeal to Mrs. Setchfield at that time, and she ended up signing a contract with Singer. Did she make the right decision? Table ST3.6 gives the details of the two options:
Table 3.6

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Reduced Year Installment Year Installment Payment 1988 $65,277 1995 $65,277 65.277 65,277 99865,277 1999 65,277 65.277 2000 65,277 65,277 2002 65,277 2003 65,277 2004 65,277 2005 65.277 2006 65,277 65,277 $32.639 32,639 32,639 32,639 32.639 32,639 32,639 32,639 32,639 1989 1990 1991 1992 1993 1994 65,2771996 65,277 1997 65,277 1998 65,277 65.277 2001 2007