What interest rate would you be indifferent between two plan

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Assume that you just won the state lottery. Your prize can be taken either in the form of $42,000 at the end of each of the next 25 years (i.e., $1.05 million over 25 years) or as a lump sum of $490,000 paid immediately?

If you expect to be able to earn 5% annually on your investments over the next 25 years, which alternative should you take?

At approximately what interest rate would you be indifferent between the two plans? Round your answer to two decimal places.

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Reference no: EM131087637

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