Question

In: Economics

Assume that you just hit the ​$9 million jackpot in a​ lottery, which promises you a...

Assume that you just hit the

​$9

million jackpot in a​ lottery, which promises you a payment of

​$3

million for the next three years. Since​ we've established that the jackpot will not be worth

​$9

million in​ today's dollars, how much is it worth if the interest rate is

12

​percent?​ (Hint: the first payment is made​ immediately.)

​$nothing

million​

Solutions

Expert Solution

Solution:-

Present worth ($ Million) = Equal payment x P/A(r%, N) x (1 + r)#

                                                  = 3 x P/A (12%, 3) x 1.12

                                                  = 3 x 2.4018** x 1.12

                                                  = $8.07 Million


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