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As a new employee in the Lottery Commission, your first job is to design a new...

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Finance

As a new employee in the Lottery Commission, your first job isto design a new prize. Your idea is to create two grand prizechoices: (1) receiving the lump sum of $1 million at the end ofyear 5, or (2) receiving $500,000 today followed by a lump sumamount at the end of year five. Using an interest rate of 8%, whichof the following comes closest to the amount prize (2) needs to payat the end of year five in order for both prizes to have the samepresent value?

a.

$680,580

b.

$333,333

c.

$1,000,000

d.

$500,000

e.

$265,336

the answer is a or e?

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