Lucky louie just won the lottery! he has a choice of taking $1,000,000 in cash or receiving $50,000 per year for 30 years beginning at the end of this year. the best way to make this choice is to

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Business

Paisley Stein

16 December, 18:07

Lucky louie just won the lottery! he has a choice of taking $1,000,000 in cash or receiving $50,000 per year for 30 years beginning at the end of this year. the best way to make this choice is to

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Brenna Holmes · Answer 1

Given that Lucky won $1000000 and has an option of receiving $50000 p. a for 30 years, the total amount received after 30 years in case he goes for option 2 will be:

amount = (yearly payment) + (number of years)

= (50000) * (30)

=$1,500,000

This implies that the second option is best choice. Given the information, we shall conclude that the best thing to do is to calculate the present value of the annuity payments.

The answer is D]