Problem:
You are the manager of an annuity settlement company. Jim Patton just won the state lottery which promises to pay him $1,000 per year for 20 years, starting from today, and $2,000 per year for years 21-45, given a 9% discount rate. Your company wants to purchase the proceeds from the lottery from Jim.
Required:
Question: What is the most that your company can offer?
a. $12,633.85
b. $13,770.90
c. $16,940.38
d. $18,680.95
Note: Provide support for your rationale.