Question
Congratulations! You have just won the State Lottery. The lottery prize was advertised as an annualized $105 million paid out in 30 equal annual payments
Congratulations! You have just won the State Lottery. The lottery prize was advertised as an annualized $105 million paid out in 30 equal annual payments beginning immediately. The annual payment is determined by dividing the advertised prize by the number of payments. Instead you could take a one lump cash prize of the present value of all the annuity payments using a 4.5% discount rate. You now have up to 60 days to determine whether to take the cash prize or the annuity. Which option is better and why. Be sure to cite sources and provide any calculations that can help in determining the best outcome.
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