Which option has the highest present value

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Reference no: EM131701689

Great news! You've just won a lottery. Bad news! You have to make a decision.

Here are your options:

a) Cash option-you may accept $2.25 million today

b) Annual Annuity-you may receive $250,000 per year (at the end of each year) for the next 10 years

c) Monthly Annuity-you may receive $25,000 per month (at the end of each month) for the next 96 months.

Your problem: Which option has the highest present value?

Note: Since interest rates are so low these days, assume a discount rate of 2.0%.

Reference no: EM131701689

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