Banks everywhere are offering a rate of 5%. You have just won the $1,000,000 lot

Question

Banks everywhere are offering a rate of 5%. You have just won the $1,000,000 lottery and they are offering you four options to receive your winnings:

                                                                                                            Present Value

$1,000,000 in cash right now                                             ___________

Annual checks of $75,000 for 20 years                            ___________

$7,000 checks monthly for 20 years                                  ___________

$1500 checks weekly for 20 years                                    ___________

What is the present value of each option?

Which option will give you the greatest present value?                      I choose ______

Explanation / Answer

1) PV of $1,000,000 in cash right now = $1,000,000.

2) PV of annual checks of $75,000 for 20 years.

PV of cash flows = PMT * [{1

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