Question
The top prize for the state lottery is $113,155,000. You have decided it is time for you to take a chance and purchase a ticket.
The top prize for the state lottery is $113,155,000. You have decided it is time for you to take a chance and purchase a ticket. Before you purchase the ticket, you must decide whether to choose the cash option or the annual payment option. If you choose the annual payment option and win, you will receive $113,155,000 in 25 equal payments of $4,526,200one payment today and one payment at the end of each of the next 24 years. If you choose the cash payment, you will receive a one-time lump sum payment of $56,438,699.55. At what interest rate would you be indifferent between the cash and annual payment options?
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