To determine whether a lottery winner would prefer to receive the money in a single lump sum immediately or receive an equal amount over a period of years, you would use which type of time value of money calculation?
A) The future value of an annuity.
B) The present value of an annuity.
C) The present value of a single amount.
D) The future value of a single amount.

Question

Quizplus · Accepted Answer

The present value of an annuity calculation is used to determine the current worth of a series of future payments, helping to compare it to a lump sum received today.

To Determine Whether a Lottery Winner Would Prefer to Receive