Multiple Choice
Lottery A pays $1,000 today and Lottery B pays $1,750 at the end of five years.If the discount rate is 5%, which lottery should you choose
A) Lottery A, because its future value is $1,276.
B) Lottery B, because its present value is $1,371 which is more than that of Lottery A.
C) Lottery B, because it pays $1,750 which is more than $1,000 from Lottery A.
D) Either option gives the same value over time.
Correct Answer:
Verified
Correct Answer:
Verified
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