Sally Has Just Won the Lottery

Sally has just won the lottery.She is given two equivalent choices as to how the winnings will be paid.She can receive a lump sum of $A today or she can receive 20 semi-annual payments.The first payment would be $10,000 and is to be paid today,with each succeeding payment being 91% of the preceding payment [2^nd payment = 10,000(0.91) ].If the interest rate is j₂ = 8%,what is the value of A?

A) $65,155.39
B) $71,599.33
C) $73,672.34
D) $74,463.30

Correct Answer:

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