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You have won the lottery! The lottery bureau is giving you two options. Choice A pays $1,000,000 immediately. Choice B pays $1,750,000 at the end of 5 years. Using a discount rate of 5%, based on present values, which option do you choose? Using the same discount rate of 5%, based on future values, which do you choose? Which is the better choice only considering the time value of money - not your current personal need. Separate answers for present value and future value.

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Solution Summary

This solution provides a financial analysis of two lottery winning options and answers which is superior.

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If we were to compare present values,

Option A is worth 1,000,000 (obviously, since it pays 1 million ...

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