Assume that you have just won $5,000,000 in the lottery and will receive $250,000 per year...
Assume that you have just won $5,000,000 in the lottery and will receive $250,000 per year for the next 20 years. How much is your prize worth today if the interest rate is 8%?
Select one:
a. $1,072,731
b. $2,454,525
c. $2,185,219
d. $1,165,250
Homework Answers
ANS b. $2,454,525
| Annuity PV Factor (End of Year) = | P [ 1 - ( 1 + r )-n ] |
| r | |
| 250000* [ 1 - ((1 / (1 + 8%)^20))] | |
| 8% | |
| 196362.9481 | |
| 0.08 | |
| 2454525 | |
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