You have just won first prize in the publisher’s book contest. You are given the following payoff options:
Option 1. $7,000,000 today
Option 2. $2,000,000 today plus $225,000 per year forever beginning one year from today.
At what interest rate are you indifferent between options 1 and 2?

Answer rating: 100% (QA)

Working the rate at which we would be indifferent would lead to same Present v... View the full answer