...you give your friend? You win a lottery. You have a choice of two ways to be paid. If you pick Payout Scheme X, you get $2,750 today. If you pick Payout Scheme Y, you get three payments: $1,000 today, $1,000 one year from today, and $1,000 two years from today.
Years after your lottery win, a friend in another country calls to ask your advice. By wild coincidence, she has just won a lottery with the same payout schemes. She must make a quick decision about whether to collect her money under Payout Scheme X or Payout Scheme Y. Your best advice to your friend is:
A. Payout Scheme Y is always better.
B. It will depend on the interest rate; advise her to get a calculator.
C. Payout Scheme X is always better.
D. None of these answers is good advice.
Years after your lottery win, a friend in another country calls to ask your advice. By wild coincidence, she has just won a lottery with the same payout schemes. She must make a quick decision about whether to collect her money under Payout Scheme X or Payout Scheme Y. Your best advice to your friend is:
A. Payout Scheme Y is always better.
B. It will depend on the interest rate; advise her to get a calculator.
C. Payout Scheme X is always better.
D. None of these answers is good advice.