(L. OBJ. 3) Using the time value of money to compute the present and future values of single lump sums and annuities [10—15 min]
Refer to the lottery payout options summarized in Exhibit 20-9.
Requirement
1. Rather than comparing the payout options at their present values (as done in the chapter), compare the payout options at their future value, 10 years from now.
a. Using a 8% interest rate, what is the future value of each payout option?
b. Rank your preference among payout options.
c. Does computing the future value, rather than the present value of the options, change your preference between payout options? Explain your reasoning.
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