You have just won a lottery that will pay you $20,000 a year for the rest of your life.
The first payment will be made today. You expect to live for 40 more years, and you
believe you can average an annual risk-free return of 6% over the next 40 years. A
company calls you and offers to buy your ticket from you for a lump sum payment of
$325,000 today. Should you take their offer? Assume you will receive your last
payment at the end of the 40th year.

Question

Quizplus · Accepted Answer

The Answer of You have just won a lottery that will pay you $20,000 a year for the rest of your life.
The first payment will be made today. You expect to live for 40 more years, and you
believe you can average an annual risk-free return of 6% over the next 40 years. A
company calls you and offers to buy your ticket from you for a lump sum payment of
$325,000 today. Should you take their offer? Assume you will receive your last
payment at the end of the 40th year.

You Have Just Won a Lottery That Will Pay You