You win the lottery and are given the option of receiving $250,000 now or an annuity of $25,000 at the end of each year for 30 years. Which of the following is correct? (Ignore taxes.)
A) You cannot choose between the two without first calculating future values.
B) You will always choose the lump regardless of interest rates.
C) You will choose the annuity payment if the interest rate is 7%.
D) You will always choose the annuity.
E) Comparing the future value of the two alternatives will lead to a different decision than you will reach from a comparison of the present values.
Correct Answer:
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