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

CHAPTER 9: TIME VALUE ANALYSIS Homework Problem 4.4 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. The rate of return on securities of similar risk to the lottery earning (e.g.) the rate on 20 -year U.S. Treasury bonds) is 4%. a. What is the present value of your willings? b. You are now given the following options for distributing your winnings: Option 1: lump sum payment of the entire amount Option 2: annual payments as described above Which option would you choose? Why

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