Assume that you won $400 million in the mega million lottery. How much have you really won? In answering this question, consider the concept of the time value of money. Can you write down how much you have won in an equation if you go for the lump sum payout over 20 years? (Hint: take a look at the coupon bond equation in Chapter 4 of the textbook. The problem is very similar to a coupon bond with one key difference, MODULE 4) From the mega millions website: “The Mega Millions annuity is paid out as one immediate payment followed by 29 annual payments. Each payment is 5% bigger than the previous one. This helps protect winners’ lifestyle and purchasing power in periods of inflation.”
Q7) Assume that you won $400 million in the mega million lottery. How much have you really won? In answering this question, consider the concept of the time value of money. Can you write down how much you have won in an equation if you go for the lump sum payout over 20 years? (Hint: take a look at the coupon bond equation in Chapter 4 of the textbook. The problem is very similar to a coupon bond with one key difference, MODULE 4)
From the mega millions website: “The Mega Millions annuity is paid out as one immediate payment followed by 29 annual payments. Each payment is 5% bigger than the previous one. This helps protect winners’ lifestyle and purchasing power in periods of inflation.”
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