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
Thank you for the opportunity to help you with your question!
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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