Should you prefer to receive $100,000 right now or $10,000 at the end of each of the next 12 years?
A) $100,000 now.
B) $10,000 at the end of each of the next 12 years.
C) The answer depends on the time value of money.
D) Either alternative is equally valuable.

Question

Quizplus · Accepted Answer

The best choice depends on the time value of money. If the present value of receiving $10,000 for the next 12 years is greater than $100,000 now, then it is better to choose the annuity. However, if the present value of the annuity is less than $100,000, then taking the lump sum now is the better choice. Therefore, it is important to consider the time value of money and the interest rates involved before making a decision.

Should You Prefer to Receive $100,000 Right Now or $10,000