ou just won the NY State Lottery. The Grand Prize is $275 million. Lottery officials give you a choice to receive the $275 million today, or you can receive $15 million per year for the next 25 years. What should you do, assuming interest will be stable at 2.5% per year for the entire period? Note: Ignore taxes and the utility of satisfying or delaying consumption.
ou just won the NY State Lottery. The Grand Prize is $275 million. Lottery officials give you a choice to receive the $275 million today, or you can receive $15 million per year for the next 25 years. What should you do, assuming interest will be stable at 2.5% per year for the entire period?
Note: Ignore taxes and the utility of satisfying or delaying consumption.
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take the $275 million today since the upfront payment is less than the value of the annunity |
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take the |
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take the $275 million today since the upfront payment is greater than the value of the annunity |
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take the annuity of receiving $15m per year for 25 years since the upfront payment is greater than the value of the annunity |
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