Question
Lottery Prize (millions) $ 14.00 millions Annuity (millions) $ 1.00 per year APR ( R ) 7.00% annual N (begin now) in years 25.00 years
| Lottery Prize (millions) | $ 14.00 | millions | |
| Annuity (millions) | $ 1.00 | per year | |
| APR ( R ) | 7.00% | annual | |
| N (begin now) in years | 25.00 | years | |
| Benefit of lumpsum option (Excel) | Gain/Loss of | ???? | millions |
| Benefit of lumpsum option (VBA) | Gain/Loss of | ???? | millions |
| Benefit of lumpsum (Math, Extra Credit) | Gain/Loss of | ???? | millions |
Juan has just won a lottery. He can get $14 million now (after-tax, lumpsum or one-time option), or he can get $1 million annually for 25 years starting today (after-tax, 25 payments of $1 million each). Whichever option he chooses, he can save his money at a local bank, which is offering a 7% per year return on deposits. Juan is not sure if he should pick a lumpsum option or 25-payments option. He comes to you for help. What is the benefit (or loss) of choosing the lumpsum option in todays dollars?
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High Frequency Financial Econometrics
Authors: Yacine Aït Sahalia, Jean Jacod
1st Edition
0691161437, 978-0691161433
