A judge denied a 94yearold woman s attempt to force a Lotter

A judge denied a 94-year-old woman s attempt to force a Lottery Commission to pay her $3.02 million winnings up front on the grounds that she otherwise won\'t live long enough to collect it all. The woman already received an immediate payment of $124,289, and she will receive 9 annual gross checks of $321,746. Suppose that she were able to find a buyer who was willing to buy her lottery ticket which means that the buyer would receive 9 annual gross checks of $321,746. If the woman could invest her money from selling the lottery ticket at 5.2% interest, what would be the fair amount to trade her 9 future lottery receipts?\"

Solution

The fair amount to trade this lottery ticket is the present value of all the checks she is going to receive in next 9 years. Find this fair amount as

Amount = 321746 x (P/A, 5.2%, 9) = 7.04494*321746

= $2,266,682