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After winning the lottery, you state that you are indifferent between receiving twenty $500,000 end-of-the-year payments (first payment one year from today) and receiving a lump-sum payment of $5,734,961
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After winning the lottery, you state that you are indifferent between receiving twenty $500,000 end-of-the-year payments (first payment one year from today) and receiving a lump-sum payment of $5,734,961 today. What interest rate are you using in your decision-making process such that you are indifferent between the two choices?

User Danle
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Answer

The answer and procedures of the exercise are attached in the following archives.

Explanation

You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.

After winning the lottery, you state that you are indifferent between receiving twenty-example-1
User Safiyyah
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