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2 Jun 2018
Suppose you win a small lottery and have the choice of two ways to be paid: You can accept the money in a lump sum or in a series of payments over time. If you pick the lump sum, you get $2,750 today. If you pick payments over time, you get three payments: $1,000 today, $1,000 1 year from today, and $1,000 2 years from today.
1. At an interest rate of 9% per year, the winner would be better off accepting the (lump sum or payments over time) since it has the greater present value.
2. At an interest rate of 11% per year, the winner would be better off accepting (lump sum or payments over time , since it has the greater present value.
Suppose you win a small lottery and have the choice of two ways to be paid: You can accept the money in a lump sum or in a series of payments over time. If you pick the lump sum, you get $2,750 today. If you pick payments over time, you get three payments: $1,000 today, $1,000 1 year from today, and $1,000 2 years from today.
1. At an interest rate of 9% per year, the winner would be better off accepting the (lump sum or payments over time) since it has the greater present value.
2. At an interest rate of 11% per year, the winner would be better off accepting (lump sum or payments over time , since it has the greater present value.
Elin HesselLv2
4 Jun 2018