What is the real value of the lottery

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Ike won the Michigan state lottery jackpot of $1,800,000. The state will make 20 first of the year payments of $98,000. What interest is Ike being paid on the money that he did not receive immediately? How much would the payment be if Ike was being paid 5.6% annually? OK, let's be real. The State of Michigan is not going to make any interest payments and will instead provide Ike with 20 payments of $90,000. What is the real value of the lottery if Ike thinks that the appropriate discount rate is 3.8%?

Reference no: EM13295602

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