Lucky lou has just won the lottery and will receive an annual payment of $100,000 every year for the next 20 years. if the annua

Question

Levart [38]

4 years ago

13

Lucky lou has just won the lottery and will receive an annual payment of $100,000 every year for the next 20 years. if the annua

l interest rate is 8%, what is the present value of the winnings?

Business

1 answer:

olga nikolaevna [1] · Answer 1 · 2021-11-08T06:50:06+03:00

olga nikolaevna [1]4 years ago

4 0

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

A = annual payment = $100,000
r = Interest rate = 8% = 0.08
n = Number of year = 20
PV = present value of the earnings

Therefore,
PV = 100,000*[1-(1+0.08)^-20]/0.08 = $981,814.74