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Assume the Mega Millions jackpot is $65 million payable in 25 equal annual installments of $2.6 million with the first payment payable at the end of the first year.

a. describe why the Present Discounted Value (PDV) of this jackpot is less than $65 million.

b. find out the PDV if the interest rate were 6 percent (i=0.06).

c. What is the PDV if the jackpot paid $2.6 million per year for ever?

Basic Finance, Finance

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