Question

d) Gabrielle just won Tk. 10,00,000 in the state lottery. She is given the option of receiving
either alternative A or B shown in the following table at the end of each of the next 5
years. She decides to choose the payment alternative-annuity or the mixed stream of
payments-that provides the higher future value at the end of 5 years. If Gabrielle can
earn 5% annually on her investments, which option should she take?
End of year
1
2.
Cash flow stream
Alternative A
Alternative B
2,00,000
3,00,000
2,00,000
2,50,000
2,00,000
2,00,000
2,00,000
1,50,000
2,00,000
1,00,000
10,00,000
10,00.000
3
4
5
Totals​

Answer 1

Answer:

years. She decides to choose the payment alternative-annuity or the mixed stream of

payments-that provides the higher future value at the end of 5 years. If Gabrielle can

earn 5% annually on her investments, which option should she take?

End of year

1

2.

Cash flow stream

Alternative A

Alternative B

2,00,000

3,00,000

2,00,000

2,50,00