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A local government is about to run a lottery but does not want to be involved in the payoff if a winner picks an annuity
A local government is about to run a lottery but does not want to be involved in the payoff if a winner picks an annuity payoff. The government contracts with a trust to pay the lumpsum payout to the trust and have the trust probably a local bank pay the annual payments. The first winner of the lottery chooses the annuity and will receive $ a year for the next years. The local government will give the trust $ to pay for this annuity. What investment rate must the trust earn to break even on this arrangement?
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