Economics and the Annuity Equation A recent newspaper headline reads, “Woman Wins $1,000,000 in State Lottery.”
Under the rules of the lottery, the winner receives $100,000
immediately, with nine additional annual payments of
$100,000 each. In other words, the winner receives $100,000
at the beginning of each year for 10 years. If the interest rate
is 10% per year, and we ignore income taxes, what is the
present value of the $1,000,000 lottery payout?