Question

Twenty years ago, you won a state lottery, and you received $15,000 at the end of each of the next 10 years, and $20,000 at the end of years 11 through 15. Since you did well in FIN 3403, you decided to invest each of your lottery payments. If you earned 9% per year, how much do you have at the end of year 20?

Please include how to do it in a financial calculator.

Answer 1

Rate of return = 9%

The formula used for compounding = (Investment in one year) * (1 + Rate of return)^(Years left)

For year 1-10

Investment in one year = $15,000

For year 11-15

Investment in one year = $20,000

For year 16-20

Investment in one year = $0

** Note - After 1 year, years left would be 19 (from where the compounding starts)

Year	The amount received($)	Compounded value till year 20($)	Years left
1	15,000	77,125	19
2	15,000	70,757	18
3	15,000	64,915	17
4	15,000	59,555	16
5	15,000	54,637	15
6	15,000	50,126	14
7	15,000	45,987	13
8	15,000	42,190	12
9	15,000	38,706	11
10	15,000	35,510	10
11	20,000	43,438	9
12	20,000	39,851	8
13	20,000	36,561	7
14	20,000	33,542	6
15	20,000	30,772	5
16	0	0	4
17	0	0	3
18	0	0	2
19	0	0	1
20	0	0	0

The total sum at the end of year 20 = $723,672

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