Question
Assume that you just $35 million in the Texas lottery, and hence the state will pay you 20 annual payments of $1.75 million at the
Assume that you just $35 million in the Texas lottery, and hence the state will pay you 20 annual payments of $1.75 million at the end of each year. The rate of return on securities of similar risk to the lottery earning (e.g., the rate on 20-year U.S. Treasury bonds) is 6%.
What is the present value of your willings?
You are given the following options for distributing your winnings:
Option 1: lump sum payment of the entire amount
Option 2: annual payments as described about
Which option would you choose? Why?
Need to show step by step because I don't understand at all
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