Lotteries often give you the option of taking a lump-sum payment now or a fixed amount every year for, say, 25 years. For this question, assume that the lump-sum payment is $3 million, and the yearly payments are $250,000 each year for 25 years. The first payment is made immediately, so it is not discounted, and subsequent payments are made every year thereafter. You may have to use a spreadsheet program like Excel to do this.

(a) Find the discount rate where the present value of the 25-year cash stream is equal to the lump-sum payment.

(b) If your discount rate is higher than this, should you take the lump-sum payment or the period payments?