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4. The state lottery claims that its grand prize is $1 million. The lucky winner will receive $100,000 upon presentation of the winning ticket plus
4. The state lottery claims that its grand prize is $1 million. The lucky winner will receive $100,000 upon presentation of the winning ticket plus $100,000 at the end of each year for the next 9 years. Assume a 8% discount rate.
a-Why isn't this really a million-dollar prize?
b. What would it actually be worth in dollars to you?
c. What would the 10 yearly payments need to be for the present value of the lottery to be $1 million? Hint: The first step is to determine what type of an annuity the lottery represents.
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