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Difference between the present values of two options

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Reference no: EM131710704

You won a $50 million dollar state lottery today! Upon winning, you were informed that you could choose to receive the prize money in one of the following two ways:

1) 25 payments of $2 million per year starting today

2) $30 million dollars paid today

Assume the market interest rate at this time is 7%. Which option should you take? In other words, which option has the higher total present value? What is the difference between the present values of the two options?

Reference no: EM131710704

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