Problem:
You win a $10,000,000 lottery. The lottery will pay you 20 annual payments of $500,000 with the first payment received immediately and the last payment 19 years from today. The constant risk free interest rate is 7%
Answer the following question:
Question 1: What is the present value of the lottery payments?
Question 2: Would you prefer to receive 21 annual payments of $480,000 starting today? What is the present value of those payments?
Explain in detail and describe all computations.