Suppose that Clint wins a lottery jackpot of $300 million. He can receive it over the next 30 years in annual payments of $10 million, or he can receive a lump sum of $100 million immediately.
Assuming that taxes are not a consideration, should Clint take his winnings as a lump sum?
A) Yes, but only if rapid inflation is expected over the next 30 years.
B) Yes, but only if deflation is expected over the next 30 years.
C) No, the rate of return will always be higher with the 30 annual payments.
D) Yes, if he can invest in financial assets that will yield greater returns than the interest rate implicit in the annual payments.
Correct Answer:
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