Would you take the lesser amount in cash

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Question: Suppose you have won $1 ,000,000 in a lottery. Your prize money is paid to you in five equal annual installments of $200.000 the ?rst of which is paid right away on the spot. The other four payments are made in the next four years.The lottery organization offers you the option of receiving $800,000 in cash on the spot instead of the five installments- Would you take the lesser amount in cash or would you go for the five installments? Demonstrate. Note: Assume the interest rate on risk-free deposits is 4%

Reference no: EM133552717

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