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Few years ago, Publishers Clearing House was having an interesting promotion. The winner of their sweepstakes would win $1 million up front and then $5,000
Few years ago, Publishers Clearing House was having an interesting promotion. The winner of their sweepstakes would win $1 million up front and then $5,000 per week for the rest of his / her life. (a) Compute the present value of this prize assuming the person lives forever and the discount rate is 6% per year. (b) Same as part a) but assume the person lives for another 50 years. (c) If the winner has a choice of taking $5 million up front or the prize above, when will a person prefer $5 million to the prize?
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