Jia has just won a $20 million lottery, which will pay her $1 million at the end of each year for 20 years. An investor has offered her $10 million for this annuity
She estimates that she can earn 10 percent interest, compounded annually, on any amounts she invests. She asks your advice on whether to accept or reject the offer. What will you tell her? (Ignore Taxes)
P = ($1,000,000/0.1 ) × [1-(1/(1.1 )203= $8,514,000
$10,000,000 > $8,514,000
Accept the offer.
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