Ted just won the lottery, and he must choose among three award options. He can elect to receive a lump sum today of $61m, to receive 10 payments of $9.5 million per year at the end of each year (the first payment occurs one year from now), or to receive 30 payments of $5.5 million per year at the end of each year (the first payment occurs one year from now).
i. If he thinks he can earn 7% annually, which should he choose?
ii. If he thinks he can earn 9% annually, which is the best choice?
iii. Explain how interest rates influence the award options.
Option 1 Lump sum 61,000,000 Option 2 10 payments 9,500,000 Option 3 30 payments 5,500,000 i. If he thinks he can earn 7% annually, which should he choose?Option 1 Present Value $61,000,000.00…
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