What is the lottery payment plan implied rate
Question # 00420996
Posted By:
Updated on: 11/09/2016 09:14 AM Due on: 11/09/2016
ou win a lottery and are offered the lump sum payment of $380,000.00 or the right to
receive $100,000 per year for five years.
What is the lottery payment plan implied rate of time preference (approximation is ok)?
What is your implied rate of time preference, if you decide to take the lump sum versus the
annuity? How would your expectations of future inflation affect your decision process on
choosing lump sum versus annuity? Show all calculations?
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Solution: What is the lottery payment plan implied rate