Question

You win your state lottery. The lottery officials offer you the following options: you can accept annual payments of $50,000 for 20 years or receive an upfront payment of $700,000. Ignoring issues like mortality tables, taxes, etc.; and assuming the first payment is made immediately, what market interest rate would make it more attractive to take the upfront payment?

Answer 1

The answer is "4.121% for 20 year".

Step-by-step explanation:

• The $700,000 could be compared to both the current flow rate of $50 000 per year over the next 20 years.
• It used a financial calculator or a table, as well as the inner rate of return is 4.121 percent.
• When you are confident, it would be capable of earning more than 4.121 percent every year in the next 20 years, on average.