Venus just won $23,150,000 in the Powerball. She has an option of receiving the lump sum today or annual payments of $350,000 for the next 25 years. Based on the current market, Venus could earn an 8% return on her investment.
Instructions
a. Which option should Venus choose?
b. What would the annual payments need to be for Venus to be indifferent to the monetary options?
c. If she decided to take the lump-sum payment, she would invest for the next 25 years, retire, and purchase a jet to travel the world. How much will she have to invest in the jet and travel the world in 25 years with an 8% return on investment? What if she only earns a 6% return?

Question

Venus just won $23,150,000 in the Powerball. She has an option of receiving the lump sum today or annual payments of $350,000 for the next 25 years. Based on the current market, Venus could earn an 8% return on her investment. 
Instructions 
a. Which option should Venus choose?
b. What would the annual payments need to be for Venus to be indifferent to the monetary options?
c. If she decided to take the lump-sum payment, she would invest for the next 25 years, retire, and purchase a jet to travel the world. How much will she have to invest in the jet and travel the world in 25 years with an 8% return on investment? What if she only earns a 6% return?

Quizplus · Accepted Answer

The Answer of Venus just won $23,150,000 in the Powerball. She has an option of receiving the lump sum today or annual payments of $350,000 for the next 25 years. Based on the current market, Venus could earn an 8% return on her investment. 
Instructions 
a. Which option should Venus choose?
b. What would the annual payments need to be for Venus to be indifferent to the monetary options?
c. If she decided to take the lump-sum payment, she would invest for the next 25 years, retire, and purchase a jet to travel the world. How much will she have to invest in the jet and travel the world in 25 years with an 8% return on investment? What if she only earns a 6% return?

Venus Just Won $23,150,000 in the Powerball