Problem - Marty has just won the National Magazine Sweepstakes. He has two options for receiving his prize. The first option is to accept a $133,000 cash payment today. The second option is to receive $19,500 at the end of each of the next 12 years and a $37,500 lump sum payment in the 13th year. Marty can invest money at a 8% rate.
(a) Calculate the present value of the two options.
Which option should Marty choose to receive his winnings?
(b) If the money is invested at 11%, calculate the present value of the two options.
Which option should he choose?
Attachment:- Assignment.rar