Question: CHAPTER 9: TIME VALUE ANALYSIS Homework 4.4, Chapter 9 a. Assume that you just $25 million in the Texas lottery, and hence the state will

CHAPTER 9: TIME VALUE ANALYSIS Homework 4.4, Chapter 9 a. Assume that you just $25 million in the Texas lottery, and hence the state will pay you 20 annual payments of $1.25 million at the end of each year. If the rate of return on securities of similar risk to the lottery earning (e.g., the rate on 20-year US. Treasury bonds) is 5%, what is the present value of your winnings? b. Considering this, which option should you take? Explain your answer. - Option 1: a lump sum payment of $25 million up front - Option 2: 20 annual payments of $1.5 million

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