Present Value of an Annuity
On January 1 you win $2,600,000 in the state lottery. The $2,600,000 prize will be paid in equal installments of $260,000 over 10 years. The payments will be made on December 31 of each year, beginning on December 31. If the current interest rate is 5%, determine the present value of your winnings. Use the present value tables in Exhibit 7. Round to the nearest whole dollar.
Homework Answers
present value of annuity = annuity x PVAF
= $260,000 x 7.72173
= $2,007,649.8
where,
PVAF(5%, 10) = 7.72173
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Present Value of an Annuity On January 1 you win $2,600,000 in the state lottery. The $2,600,000 prize will be paid in e...
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