CHAPTER 9: TIME VALUE ANALYSIS Homework Problem 4.4 Assume that you just $20 million in the Texas lottery, and hence the state will pay you 20 annual payments of $1 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?

CHAPTER 3: TIME VALUE ANALYSIS Homework Problem 4.4 Assume that you just $20 million in the Texas lottery, and hence the state will pay you 20 annual payments of $1 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. Whatis 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