Congratulations! You have just won the State Lottery. The lottery prize was advertised as an annuitized $80 million paid out in 20 equal annual payments beginning immediately. The annual payment is determined by dividing the advertised prize by the number of payments. You now have up to 60 days to determine whether to take the cash prize or the annuity A. If you were to choose the annuitized prize, how much would you receive each year? B. The cash prize is the present valuc of the annuity payments. If the interest rate used to calculate the cash prize is 70%, how much will you receive if you choose the cash prize option? C. Now suppose that, as many lotteries do, the annuitized cash flows will grow by 3% per year to keep up. with inflation, but they still add up to $80 million. If you took the annuitized cash prize instead, how much would you receive (before taxes)?
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Answers: 1
Congratulations! You have just won the State Lottery. The lottery prize was advertised as an annuiti...
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