Question
Congratulations, you won a lottery of $10 million! You are offered three options to receive your windfall: A) A lump sum of $10 million received
Congratulations, you won a lottery of $10 million! You are offered three options to receive your windfall:
A) A lump sum of $10 million received immediately
B) An annual payment of $500,000 for 30 years
C) A monthly payment of $50,000 for 30 years
a. If the discount rate is 7%, which option would you choose? Show your work.
b. Calculate the effective annual rate for option C.
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Financial Management Principles And Practice
Authors: Timothy Gallagher
6th Edition
1930789157, 978-1930789159
