Question

After hearing a knock at your front door, you are surprised to see the Prize Patrol from a large, well-known magazine subscription company. It has arrived with the good news that you are the big winner, having won $29 million. You have three options.

(a) Receive $1.45 million per year for the next 20 years.
(b) Have $10.25 million today.
(c) Have $2 million today and receive $1,150,000 for each of the next 20 years.

Answer 1

To determine the best option for the $29 million prize, we need to compare the present value of each option. Option (a) is receiving $1.45 million per year for the next 20 years. Option (b) is receiving $10.25 million today. Option (c) is receiving $2 million today and $1,150,000 for each of the next 20 years. Therefore, all three options are equivalent in terms of value and will result in receiving a total of $29 million.

Step-by-step explanation:

To determine the best option for the $29 million prize, we need to compare the present value of each option.

Option (a) is receiving $1.45 million per year for the next 20 years, which amounts to a total of $29 million.

Option (b) is receiving $10.25 million today.

Option (c) is receiving $2 million today and $1,150,000 for each of the next 20 years, which also amounts to a total of $29 million.

Therefore, all three options are equivalent in terms of value and will result in receiving a total of $29 million.