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    Cash Flow Stream of the State Lottery

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    A person wins $1 million in the state lottery. Actually, the person receives $50,000 per year for 20 years. The present value of this is considerably less than $1 million. Using a 10% discount rate, what is the duration of this cash flow stream?

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    Solution Preview

    Let us have a mental framework of this scenario:

    0 5 10 15 20
    $50,000 $50,000 $50,000 $50,000.........every ...

    Solution Summary

    The expert examines the cash flow of the state lottery. The duration of the cash flow stream is determined.