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suter [353]
3 years ago
5

Suppose you just won the state lottery, and you have a choice between receiving $2,575,000 today or a 20-year annuity of $250,00

0, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes.
Business
1 answer:
Shkiper50 [21]3 years ago
8 0

Answer:

Ans. rate of return= 7.37%

Explanation:

The easiest way to find this discount rate is to set a MS Excel sheet and use the function "Find Goal". In the attachments, there is a spreadsheet that I got ready for you. There are 2 cells in color, one is yellow and the other one is green. You just go ahead and replace the value of the green cell with any percentage that you want, for example, 2%, then use the function "find goal" and set the objective cell to be the yellow cell (B5), changing the cell in green (B7), and hit enter.

Best of luck.

Download xlsx
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