Reference no: EM133169567

Question - Today is your lucky day! You have just won the lottery today and must decide on how you would like your winnings paid to you. The lottery commission has given you a choice of three different options to receive your money. The details of each option are as follows:

Option 1: A payment of $65,000 one year from today; a payment of $85,000 after three years; and a final payment of $100,000 at the end of the fifth year.

Option 2: A single payment of $200,000 today.

Option 3: Payments of $25,000 at the end of each and every year for the next eight years and also a single lump sum payment of $80,000 at the end of the ninth year.

The prevailing market rate of interest is 9%.

Required -

1. Calculate the present value for each.

2. Based on your amounts calculated above, which option should you choose if you want to choose the best one?