+x

 

Gordon Ho - 2/22/2011 8:44:21 PM

um.. sounds like the question is not clear..

so the lottery winner will get 750 at the end of year one..
and the second payment in year 10?!

as i read the question, the winner will get his/her first payment at the end of year 10...
so we should calculate the value of the perpetuity at year 10...
then discount it back into year 1...

did i misunderstand the question?

[NEAS: The perpetuity begins in year 10, so discount back to beginning date.]