Problem
According to a news item, the owner of a lottery ticket paying $3 million over twenty years is offering to sell the ticket for $1.2 million cash now. "Who knows?" the ticket owner explained. "We might not even be here in twenty years, and I do not want to leave it to the dinosaurs."
a. If the ticket pays $150,000 per year at the end of each year for the next twenty years, what is the present value of the ticket when the appropriate rate for discounting the future income is thought to be 10 percent?
b. If the discount rate is in the 10 percent range, is the sale price of $1.2 million reasonable?
c. Can you think of any disadvantages of buying the lottery earnings rather than a bond?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.