First of all 1M PMT, 7%, 20N = PV of 10.59
The Fed Funds Rate alone is 3.75%
180 Day T Bills are at 4.155%
These are risk-free rates. The discount rate should be higher.
Edit:
Nevertheless, the amount the lottery quotes is the sum of all the payments and not the PV of those payments - thus encouraging the public to gamble more than they normally would.
[ October 20, 2005, 07:50 PM: Message edited by: DJ FC ]
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