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You won the state lottery on January 1, 2018. You can elect to receive (a) $1,000,000 at the end of 2019 or (b) $150,000 per
You won the state lottery on January 1, 2018. You can elect to receive (a) $1,000,000 at the end of 2019 or (b) $150,000 per year for 10 years with the first payment at the end of 2019. The interest rate is expected to be 6% for 2018 and 7% from 2019 to 2023 and 8% from 2024 onwards. How much is each option worth in present value dollars? Explain the steps.
- How much is option (a) worth in present value dollars?
- How much is option (b) worth in present value dollars?
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