2. you win the lottery and can get your winnings as $100,000,000 now or $2,000,000 in 10 years. if you can…

2. you win the lottery and can get your winnings as $100,000,000 now or $2,000,000 in 10 years. if you can invest the money at 9% simple interest, what is the best option?

2. you win the lottery and can get your winnings as $100,000,000 now or $2,000,000 in 10 years. if you can invest the money at 9% simple interest, what is the best option?

Answer

Explanation:

Step1: Calculate the future - value of the first option

The formula for simple - interest is $A = P(1+rt)$, where $P$ is the principal amount, $r$ is the annual interest rate, and $t$ is the time in years. Here, $P = 100000$, $r=0.09$, and $t = 10$. $A_1=100000\times(1 + 0.09\times10)$ $A_1=100000\times(1 + 0.9)$ $A_1=100000\times1.9$ $A_1 = 190000$

Step2: Compare with the second option

The second option gives $A_2=200000$ in 10 years.

Since $A_2 = 200000$ and $A_1=190000$, and $200000>190000$.

Answer:

Taking $200000$ in 10 years is the best option.