1. Suppose you just won the state lottery, and you have a choice between receiving $2,550,000...

50.1K

Verified Solution

Question

Finance

1. Suppose you just won the state lottery, and you have a choicebetween receiving $2,550,000 today or a 20-year annuity of$250,000, with the first payment coming one year from today. Whatrate of return is built into the annuity? Disregard taxes.
2. Your girlfriend just won the Florida lottery. She has thechoice of $15,000,000 today or a 20-year annuity of $1,050,000,with the first payment coming one year from today. What rate ofreturn is built into the annuity?
3. How much would $100, growing at 5% per year, be worth after75 years?

Answer & Explanation Solved by verified expert

3.6 Ratings (354 Votes)

The formulas See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

1. Suppose you just won the state lottery, and you have a choicebetween receiving $2,550,000 today or a 20-year annuity of$250,000, with the first payment coming one year from today. Whatrate of return is built into the annuity? Disregard taxes.2. Your girlfriend just won the Florida lottery. She has thechoice of $15,000,000 today or a 20-year annuity of $1,050,000,with the first payment coming one year from today. What rate ofreturn is built into the annuity?3. How much would $100, growing at 5% per year, be worth after75 years?