Congratulations, you and your family have won a lottery that pays you $100,000 a year forever. Ignore taxes in answering the following question and the risk of a default by the entity making the lottery payments.

a. You are offered a lump sum of $1.6 million today to forego the $100,000 a year forever. Suppose that the interest rate on risk-free investments is 5%. Would you accept the $1.6 million?

b. Suppose instead that the interest rate on risk-free investments is 10% instead of 5%. Would you accept the $1.6 million?