Suppose that you have a choice to receive a lottery payout in two different payment streams:
a. 20 payments of $5,000 at the end of each 6 months.
b. 20 payments of $5,000 at the beginning of each 6 months.
Interest rate is 3% per year. Which choice would you prefer?
1) choice b since it produces a higher PV
2) choice a because it gives you a higher FV
3) choice a because it produces a higher return
4) both choices are valued the same since the interest rate is the same.