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3) I have just won the LOTTO. The jackpot was 20 million dollars. The state has offered me one million dollars per year for 20
3) I have just won the LOTTO. The jackpot was 20 million dollars. The state has offered me one million dollars per year for 20 years (ignore taxes) or a lump sum. The lump sum is the present value of the payments. How much must the state invest today (the lump sum amount) to payout the annuity, if they can invest at the T-Bond rate of 6%? (ignore taxes)
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If I can invest at an average of 12%, how much can I withdraw from the lump sum per year over the 20 year window?
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Should I take the lump sum or the 1 million dollar annuity? WHY?
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