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Congratulations! You have just won the Powerball jackpot. You have the option of accepting 60 million dollars in a lump sum or receiving an annual
Congratulations! You have just won the Powerball jackpot. You have the option of accepting 60 million dollars in a lump sum or receiving an annual payout of 3 million dollars for 30 years. Which option yields more money depends on interest rates. The amount of money you would need (the present value P ) to purchase an annuity that carries an APR of rr as a decimal, and pays 3 million dollars per year for 30 years is given by P=r3(1(1+r)30)milliondollars. (a) Make a graph that shows both P and the target value of 60 . Use a horizontal span of 0 to 0.1 . (b) What interest rate corresponds to a present value of 60 million dollars? Round your answer as a percentage to one decimal place. % (c) You are able to find an annuity that pays an APR of 5\%. Should you take the lump sum or the yearly payout? lump sum yearly payout
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