Question
Please provide answer with formulas used . I am not looking for the answer as much as how it was calculated. Suppose you won the
Please provide answer with formulas used . I am not looking for the answer as much as how it was calculated.
Suppose you won the Wisconsin lottery for $2,965 and are entitled to receive a series of payments for the next 29 years in equal amounts (=$2,965/29), paid at the conclusion of each year. If the state were to offer you a cash settlement to be paid to you in five years, what offer amount would leave you indifferent between taking the offer or the stream of payments to which you are entitled. Assume a discount rate of 11% and express you answer in current dollars (round to the nearest dollar amount).
NOTE:To account for rounding, answers within $100 of the correct answer will be graded correct.That is, if the correct answer is $10,422, any answer within the 10,322 to 10,522 range will be correct.
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