Assume Lisa wins $1,000,000 in the lottery. She has the following options to receive her money: (1) An immediate one-time payment of $900,000; or (2) ten annual payments of $100,000 with the first $100,000 received immediately.
a) Which option will Lisa choose if her personal discount rate is 2 percent?
b) Which option will Lisa choose if her personal discount rate is 6 percent?
c) Is Lisa more impatient in part a) or part b)? Explain.