Math question help needed

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Business Finance

Question Description

Penny just won the state lottery that offers a choice of payments. She may opt to receiving $1,000,000 today or $2,000,000 at the end of 10 years. If she can invest her funds at 5% annually, which is the better choice?


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Explanation & Answer

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Investing at 5% annually, she will get an interest of:

Annual interest is:

5% of $1,000,000


For the 10 years he gets an interest of $50,000 *10


Adding the principal amount will give him $1,500,000

Investing for that interest rate pays far less and so its better getting $2,000,000 after 10 years.

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avpubynfXvz (1253)
Purdue University

Awesome! Perfect study aid.