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Problem:

You win a $10,000,000 lottery. The lottery will pay you 20 annual payments of $500,000 with the first payment received immediately and the last payment 19 years from today. The constant risk free interest rate is 7%

Answer the following question:

Question 1: What is the present value of the lottery payments?

Question 2: Would you prefer to receive 21 annual payments of $480,000 starting today? What is the present value of those payments?

Explain in detail and describe all computations.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M91146108

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