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Solution r=Rate of return=12% n=Number of years=10 Lets assume that $220,000 is the future value and A be the present value so, Future value = Ax (1+r)^n $220,000 = AX (1+12%) 10 20,000 = Ax 58) A = $220,000/3.1058 A= $70,835.21 Conclusion Hence in order to be indifferent between the two choices Bob must offer $70835.21 currently to lottery winners.
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