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    Actual Present Value

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    If you did win $12 million in the New York lotto and you will be paid over a 20-year period- $600,000 a year- or you can get a lump sum payment up front. What is the actual present value of this $12 million? Interest rate is 5%.

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    Solution Preview

    (i) Lumpsum Option Present Value = $12 million

    (ii) Annuity Option Present ...

    Solution Summary

    The Solution provides the correct option that should be chosen.