Based on an expected inflation of 3%, a return in their savings account of 5%, and an expected return from the stock market of 10%, which option should the family friend take?

To address the task prompts below, consider the following scenario:

Recently, a friend of your family won the lottery! They were given two options for the payout: (A) A lump sum (immediately) of $100 million; or (B) Twenty annual payments of $8 million starting at the end of the first year subsequent to winning.

Task
Using the scenario above, address the following prompts:

Based on an expected inflation of 3%, a return in their savings account of 5%, and an expected return from the stock market of 10%, which option should the family friend take?
Which “discount rate” should be applied to your analysis?
What equilibrium interest rates explain your assumptions?
Include a short reflection in which you use finance terminology. Reflect on what you have learned from this unit and how you think you could apply it in the workplace or in everyday life.

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