Who Wants to Be a Millionaire?
You just won $1 million dollars in the lottery! They offer you two options for your winnings: a lump sum
payment right now, or $100,000 a year over the next 10 years. Current 10-year interest rates are at 5%, and
the current tax on lottery winnings is 40%.
What is the amount you will receive today with the lump sum option?
Which option would you select? How would you present your argument for your decision in a debate?
Sorry, you didn’t win the lottery, but here’s a way you can still be a millionaire! Starting at age 22, every
night you take $5 out of your pocket and put it in a manila envelope (title it “Lottery Winnings”). At the end of
the year, you place the money from the envelope in a stock fund with an average interest rate of 10%.
How much will you have in the account when you retire at age 65?
What would be different if you started this plan later in your life?
Your submitted assignment must include the following:
Submit a double-spaced Word document of 1–2 pages that contains your answers to the four questions
listed in the assignment description, any calculations you performed, and all formula that were used. Also,
in the Word document, insert an Excel spreadsheet that shows how you arrived at your answers, or
screenshot of the online calculator utilized with your answers shown.
Sample Solution
