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You win the $2 million Georgia lottery. They promise you a payout of $100,000 a year for 20 years. Knowing some finance you ask them for a lump sum payment today of $1.5 million instead of take $100,000 out of the lump sum of $1.5 million and invest the rest for 19 years at a rate of 5%. If you withdraw $100,000 a year out of this investment for the next 19 years, how much will y your idea a better way to take the payments? Explain your answer.

You win the $2 million Georgia lottery. They promise you a payout of $100,000 a year for 20 years. Knowing some finance you ask them for a lump sum payment today of $1.5 million instead of take $100,000 out of the lump sum of $1.5 million and invest the rest for 19 years at a rate of 5%. If you withdraw $100,000 a year out of this investment for the next 19 years, how much will y your idea a better way to take the payments? Explain your answer.

Essentials Of Investments
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
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You win the $2 million Georgia lottery. They promise you a payout of $100,000 a year for 20 years. Knowing some finance you ask them for a lump sum payment today of $1.5 million instead of the 20 yearly installments. You immediately take $100,000 out of the lump sum of $1.5 million and invest the rest for 19 years at a rate of 5%. If you withdraw $100,000 a year out of this investment for the next 19 years, how much will you have at the end of that period? Was your idea a better way to take the payments? Explain your answer.
Transcribed Image Text:You win the $2 million Georgia lottery. They promise you a payout of $100,000 a year for 20 years. Knowing some finance you ask them for a lump sum payment today of $1.5 million instead of the 20 yearly installments. You immediately take $100,000 out of the lump sum of $1.5 million and invest the rest for 19 years at a rate of 5%. If you withdraw $100,000 a year out of this investment for the next 19 years, how much will you have at the end of that period? Was your idea a better way to take the payments? Explain your answer.
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