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As a winner of a lottery you can choose one of the following prizes: 1) 1 million now. 2) 1.5 million at the end of
As a winner of a lottery you can choose one of the following prizes:
1) 1 million now.
2) 1.5 million at the end of six years.
3) 80,000 a year forever, starting in one year.
4) 150,000 for each of the next ten years, starting in one year.
If the discount rate is 8 per cent, which is the most valuable prize?
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