The state lottery that offers a choice of payment

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Penny just won the state lottery that offers a choice of payment. She may opt for either receiving $1,000,000 today or $2,000,000 at the end of ten years. If she can invest her funds at 5% annually, which is better choice?

A. The immediate payment since the present value of the $2,000,000 payments is 1,200,000.

B. The later payment since $1,000,000 invested at 5% for ten years will be worth $1,500,000

C. The later payment since the present value of the $2,000,000 payment is $1,227,827.

D. The earlier payment since the present value of the $2,000,000 payment is $876,000

E. The earlier payment since the future value of $1,000,000 in ten years is $1,628,894

Reference no: EM13728459

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