Final answer:
The present value of the lottery ticket paying $1,000,000 today and $1,000,000 in two years at a 2% interest rate is approximately $1,961,168.
Step-by-step explanation:
To determine what is the value of a lottery ticket that pays $1,000,000 today and $1,000,000 in two years at an interest rate of 2%, we need to calculate the present value of the future payment. The present value (PV) formula is PV = FV / (1 + r)^n, where FV is the future value, r is the interest (or discount) rate, and n is the number of periods until the payment.
For the $1,000,000 received today, its present value is simply $1,000,000 because it does not need to be discounted. For the $1,000,000 received in two years, the calculation is as follows: PV = $1,000,000 / (1 + 0.02)^2, which equals approximately $961,168. Thus, combining both present values, the total value of the lottery ticket is $1,961,168.