Question: Congratulations! You just won $ 1 5 0 , 0 0 0 in the state lottery. You can collect $ 1 5 , 0 0

Congratulations! You just won $150,000 in the state lottery. You can collect
$15,000 today and receive the remainder in annual payments of the same amount (i.e., also
$15,000). Or you can take a lump-sum payment of $125,000 today. Which should you choose? Use the current U.S. Treasury 10-Year Note yield (4.50%) as your discount rate to calculate the PV of the annuity. What is the PV if your payments increase by 2% per year? Why is the U.S.
10-Year Note yield an appropriate discount rate? Or is it? What is your opportunity cost?

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