4. You have just won the lottery and you have three choices to choose from as to how you will receive your winnings.
Choice I: You would receive a lump sum payment of $75,000 today.
Choice II: You would receive $10,000 at the end of each of the next 8 years
Choice III: You would receive $10,000 at the beginning of each of the next 8 years.
You would want to choose the best choice meaning the choice with the greatest present value. Your discount rate is 8% under annual compounding© BrainMass Inc. brainmass.com March 4, 2021, 6:18 pm ad1c9bdddf
See the attached Excel file.
First of all it should be noted that receiving money earlier is always better than receiving the same amount later so ...
In a narrative statement backed up with Excel calculations, the response clearly explains the choices.