Question: Assume the same data as in Exercise 11-10, except that the current interest rate is 12%. Will the present value of your winnings using an

Assume the same data as in Exercise 11-10, except that the current interest rate is 12%. Will the present value of your winnings using an interest rate of 12% be more than the present value of your winnings using an interest rate of 5%? Why or why not?

Exercise 11-10

On January 1, you win $50,000,000 in the state lottery. The $50,000,000 prize will be paid in equal installments of $6,250,000 over eight years. The payments will be made on December 31 of each year, beginning on December 31 of this year. If the current interest rate is 5%, determine the present value of your winnings. Use the present value tables in Appendix A.

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