Question
1.Assume I won 5 million dollars in a lottery.I could take my winnings ininstallments of 1 million dollars a year for five years or a
1.Assume I won 5 million dollars in a lottery.I could take my winnings ininstallments of 1 million dollars a year for five years or a lump sum of less than 5million dollars.If I take the installments,my first installment would come the day I claimed my winnings at the state lottery office.If I take the lump sum, I would receive that payment the day I claimed my winnings at the state lottery office.Assume that the interest rate is 4% per year and that there are no taxes on the winnings.Calculate what the lump sum should be so that it would exactly equal the present value of thestream of the future stream of installments from the lottery.You must show and explain your work to be given credit for this assignment.
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