Suppose that you have a choice to receive a lottery payout, Ask an Expert

Finance

Suppose that you have a choice to receive a lottery payout in two different payment streams:

a. 20 payments of $5,000 at the end of each 6 months.

b. 20 payments of $5,000 at the beginning of each 6 months.

Interest rate is 3% per year. Which choice would you prefer?

1) choice b since it produces a higher PV

2) choice a because it gives you a higher FV

3) choice a because it produces a higher return

4) both choices are valued the same since the interest rate is the same.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92061153

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