1. The state lottery claims that its grand prize is $2 million. The lucky winner will receive $200,000 upon presentation of the winning ticket plus $200,000 at the end of each year for the next 19 years. Assume your own discount rate.

a-Why isn't this really a million-dollar prize? (5 Points)

b-What would it actually be worth in dollars to you? (5 Points)

c-What would the 20 yearly payments need to be for the present value of the lottery to be $2 million? Hint: The first step is to determine what type of an annuity the lottery represents. (10 Points)