You just won the lottery, which promises you $540,000 per year for the next 20 years,...

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You just won the lottery, which promises you $540,000 per year for the next 20 years, starting in one year. If your discount

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Answer 1

Answer #1

Given,

Annual payment (A) = $540000

Interest rate (r) = 8.25% or 0.0825

Number of years (n) = 20 years

Solution :-

Present value of your winnings

= A/r x [1 - (1 + r)^-n]

= $540000/0.0825 x [1 - (1 + 0.0825)^-20]

= $540000/0.0825 x [1 - (1.0825)^-20]

= $540000/0.0825 x [1 - 0.20485279767]

= $540000/0.0825 x 0.79514720233

= $5204600

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Answer 2

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