Great news! You've just won a lottery. Bad news! You have to make a decision.
Here are your options:
a) Cash option-you may accept $2.25 million today
b) Annual Annuity-you may receive $250,000 per year (at the end of each year) for the next 10 years
c) Monthly Annuity-you may receive $25,000 per month (at the end of each month) for the next 96 months.
Your problem: Which option has the highest present value?
Note: Since interest rates are so low these days, assume a discount rate of 2.0%.