Suppose you just won the state lottery, and you have a choice between receiving $2,455,000 today or a 20-year annuity of$230,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes.O a. 9.37%O b. 6.57%c. 6.90%d. 7.90%e. 12.57%

Given, Today's value (PV) = $2,455,000 Annuity years (Nper) = 20 Yearly payment (Pmt) = $230,000

Answered: Suppose you just won the state lottery,…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Suppose you just won the state lottery, and you have a choice between receiving $2,455,000 today or a 20-year annuity of $230,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard tax O a. 9.37% O b. 6.57% O c.6.90% O d. 7.90% O e. 12.57%