The winner of a multistate mega millions lottery jackpot worth $175 million was given the option of taking payments of $7 million per year for 25 years, beginning 1 year from now, or taking $109.355 million now. The interest rate that renders the two options equivalent to each other is closest to:
(a) 4%
(b) 5%
(c) 6%
(d) 7%
109.355 = 7(P/A,i,25)
(P/A,i,25) = 15.6221
From tables, i = 4%
Answer is (a)
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