Question

Years after you win the lottery, a friend in another country calls to ask your advice. By wild coincidence, she has just won another lottery with the same payout schemes. She must make a quick decision about whether to collect her money under the lump sum or the payments over time. What is the best advice to give your friend? The lump sum is always better. The payments over time are always better. It will depend on the interest rate; advise her to get a calculator. None of these answers is good advice.

Answer 1

The advice to give your friend is "It will depend on the interest rate"

Explanation:

• Since, my friend has won the lottery and assuming she has won the big amount, I advice her to decide based on the "interest rate".

• We can receive payments in lump sum but once again we have to analyze where we are going to invest the amount and what kind of returns it will give.

• Once again in payments over time, we have to check about the returns.

• These two can be checked based on the interest. So returns are calculated based on yearly / monthly interest.

So, we have to take decision based on the interest rate only