You win a lottery that pays $5,000 per month for 20 years, starting today. You have the option of taking a lump sum today instead of the monthly payments. The lottery people tell you that, if you take the monthly payments, the money you won is expected to earn 7.25% APR, compounded monthly, for the entire 20 years it will be invested. 

What is the lump sum you would expect to receive today? 

Discuss the pros and cons of receiving a lump sum or monthly payments?

Answer rating: 100% (QA)

SOLUTION To calculate the lump sum you would expect to receive today we need to use the present value formula for an annuity The present value of an a... View the full answer