Suppose you just won the state lottery, and you have a choice between receiving $3,025,000 today or a 20-year annuity of $250,000, with the first payment coming one year from today. What rate of return is built into the annuity

r = 5.35%

Explanation:

Given:

n = 20 PV = - $3,025,000 (the amount you should have if you receive a lump-sum today) PMT = $250,000

To find the rate of return that built into the annuity, we can use Excel with following information of the function:

=rate (nper, pmt, - PV)

rate (20,250000, - 3025000)

r = 5.35%

Hope it will find you well.