Nature Jane Has Just Won A Lottery With A Reported Prize Of 40 Million

7. Nature Jane has just won a lottery with a reported prize of $40 million. However, this reported prize is just the sum of the 20 beginning of the year payments of $2,000,000 per year, and this particular lottery doesn’t offer an upfront cash option. This presents a problem for Nature Jane because she wants to use her lottery winnings to fund her dream to build a Wildebeest Sanctuary right away and she would need more than the initial $2,000,000 lottery prize payment. Nature Jane decides to put her entire lottery prize annuity up for bid. Several insurance and finance companies respond, and Prairie Insurance Company has the highest bid of $27 million, which is accepted by Nature Jane . What annual rate of return would the company earn with their bid?

Posted in Uncategorized