What earnings rate would you be indifferent in two plans

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Reference no: EM131192494

Assume that you just won the lottery. Your prize can be taken either in the form of $ 80,000 at the ned of the next 20 years (1,600,000 over 20 years) or as a single amonut if $ 687,000 paid immediatly.

A) If you expect to be able to earn 4% annually on your investments ovwr the next 20 years, ignoring taxes and other condierations, which alternativly should you take?

B) Would your decision in part A change if you earned 6% over the next 20 years?

C) On a strictly economic basis, at approximatly what earnings rate would you be indifferent between the two plans

D) What is both of their present vaules?

Annually?

Lump Sum?

Reference no: EM131192494

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