Jane wins the lottery. She has a choice about how to receive her winnings.
Plan A: receive continuous payments of $10,000 a year for the next 20 years.
Plan B: receive $120,000 now and no additional money.
Assume that Jane can earn 6% interest compounded continuously.
A) Compute the present value of the income stream for Plan A.
B) If the yearly amount for Plan A is changed to $10,500, which plan should
Jane use if she bases her decision solely on present value?

Question

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The Answer of Jane wins the lottery. She has a choice about how to receive her winnings.
Plan A: receive continuous payments of $10,000 a year for the next 20 years.
Plan B: receive $120,000 now and no additional money.
Assume that Jane can earn 6% interest compounded continuously.
A) Compute the present value of the income stream for Plan A.
B) If the yearly amount for Plan A is changed to $10,500, which plan should
Jane use if she bases her decision solely on present value?

Jane Wins the Lottery