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q61. You win the lottery, which pays $1 million in 20 annual $50,000 payments. Your friends...

q61.

You win the lottery, which pays $1 million in 20 annual $50,000 payments. Your friends ask you how much that would be if you received a single lump-sum payment today. You do not have your calculator but you show them a (correct) equation to help solve it themselves, assuming the interest rate is 10 percent:

Screen Shot 2020-03-19 at 4.50.26 PM.png

Which equation did you show them?

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Answer #1

Ans: PDV = $50,000 x 1 - (1 / 1.10)20 / 1 - (1 / 1.10)

Explanation:

PDV = $50,000 x 1 - (1 / 1.10)20 / 1 - (1 / 1.10)

        = 50,000 x (0.8513 / 0.091)

        = 50,000 x 9.3549

        = $467,745

Thus, option [B] is correct answer.

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