Question

suppose you win the lottery with a jackpot of $30 million. but that's $30 million if you wait 25 years to get your payout. what is the value you could get today if the interest rate is 7%? group of answer choices $1,200,000 $5,527,475.33 $162,822,979.20 $6,236,094.54

Answer 1

The value that can be received today is $5,527,475.33 if the interest rate is 7%.

The value that can be received today if the interest rate is 7% can be calculated by using the formula for compound interest. This formula can be given as;

A = P (1 + r/n)^nt

Here, A represents the final amount, P represents the initial balance (which we have to find in this case), r represents the interest rate, n illustrates the number of times interest applied per time period and t represents the number of time periods elapsed.

Now by substituting the given values, we can find the value that can be received today as follows;

A = P (1 + r/n)^nt

30,000,000 = P (1 + 0.07/1)^25×1

30,000,000 = P (1 + 0.07)^25

30,000,000 = P (1.07)^25

P = 30,000,000 ÷ (1.07)^25

P = 5,527,475.33

Therefore, the value that can be received today is calculated to be $5,527,475.33

To learn more about interest rate; click here:

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