Congratulations! You have just won a $40 million lottery and have electedto receive $2 million per year for 20 years. Assume that a 4 percent interestrate is used to evaluate the annuity and that you receive each payment atthe beginning of the year.a. What is the present value of the lottery?b. How much interest is earned on the present value to make the $2 millionper-year payment?
Congratulations! You have just won a $40 million lottery and have electedto receive $2 million per year for 20 years. Assume that a 4 percent interestrate is used to evaluate the annuity and that you receive each payment atthe beginning of the year.a. What is the present value of the lottery?b. How much interest is earned on the present value to make the $2 millionper-year payment?
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 6MC: You want to invest $8,000 at an annual Interest rate of 8% that compounds annually for 12 years....
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Congratulations! You have just won a $40 million lottery and have elected
to receive $2 million per year for 20 years. Assume that a 4 percent interest
rate is used to evaluate the
the beginning of the year.
a. What is the
b. How much interest is earned on the present value to make the $2 millionper-
year payment?
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