You hold a winning ticket from your provincial lottery. It entitles the bearer to receive annuity payments of $50,000 at the end of each of the next 20 years. Alternatively, the provincial lottery has offered a lump sum payment today of $725,000. Which of the following statements is true? At every possible interest rate the lump sum payment is the best choice. At every possible interest rate, the annuity is the best choice. The best choice depends on the interest rate. You should be able to sell this ticket for more than $1 million. None of the above is correct.
You hold a winning ticket from your provincial lottery. It entitles the bearer to receive annuity payments of $50,000 at the end of each of the next 20 years. Alternatively, the provincial lottery has offered a lump sum payment today of $725,000. Which of the following statements is true? At every possible interest rate the lump sum payment is the best choice. At every possible interest rate, the annuity is the best choice. The best choice depends on the interest rate. You should be able to sell this ticket for more than $1 million. None of the above is correct.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Question 30:
You hold a winning ticket from your provincial lottery. It entitles the bearer to receive annuity
payments of $50,000 at the end of each of the next 20 years. Alternatively, the provincial lottery has
offered a lump sum payment today of $725,000. Which of the following statements is true?
At every possible interest rate the lump sum payment is the best choice.
At every possible interest rate, the annuity is the best choice.
The best choice depends on the interest rate.
You should be able to sell this ticket for more than $1 million.
None of the above is correct.
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