Tri-State Megabucks lottery

To illustrate a situation in which finding the unknown rate can be useful, let us consider that the Tri-State Megabucks lottery in Maine, Vermont, and New Hampshire offers you a choice of how to take your winnings (most lotteries do this). In a recent drawing, participants were offered the option of receiving a lump sum payment of $250,000 or an annuity of $500,000 to be received in equal installments over a 25-year period. (At the time, the lump sum payment was always half the annuity option.) Which option was better?

1. What do you think about the Tri-State Megabucks lottery discussed in the chapter advertising a $500,000 prize when the lump sum option is $250,000? Is it deceptive advertising?