Question
Last Tuesdays Mega Millions prize was estimated to be $122 million. Reported Lottery prizes are just the sum total of the future annual payments. In
Last Tuesdays Mega Millions prize was estimated to be $122 million. Reported Lottery prizes are just the sum total of the future annual payments. In this case, 26 beginning of the year annuity payments that will be paid to the prize winner. For the current prize: annual annuity payment = $122 million/26 = $4.69 million. Of course, this $122 million annuity total ignores the time value of money The winner can elect the cash option of $67 million today instead of the 26-year annuity that totals $122 million. What is the difference between todays present value of the cash option and annuity payout at 5% compounded annually? Calculate your answer as PV(cash option) - PV(annuity payout).
Group of answer choices
-$0.42 million
+$0.42 million
-$55.000 million
-$4.32 million
-$3.79 million
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