It is a common fact that many lottery winners are “broke” sooner than later. If you won a $1,000,000 lottery, would you want to collect the lump sum winnings today or receive the monies over time? How does your decision influence the ultimate amount of cash you will collect? Explain the TVM factors you would consider as you make this decision. Please list references
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If i win a lottery i will collect the lump sum today because the money i have today is worth more than the one i will receive in future. This is because i can invest with this money and earn interest rather than collecting it in future yet it will not earn me any interest. My decision will influence the ultimate amount of money i collect because i will consider the present value and the interest rate it will reward me.
When making this decision i will consider the future value, present value and the interest rate.
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