You have just won a lottery,which offers a choice in how you may receive your prize.If the interest rate is 10% per annum,compounded annually,which of the following prizes has the highest present value?
A) $2 000 000 immediately
B) an ordinary annuity of $300 000 per year for each of the next 10 years (starting one year from now)
C) $3 000 000 at the end of five years
D) $3 500 000 at the end of nine years
E) a perpetuity of $250 000 per year starting one year from now
Correct Answer:
Verified
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