Question

You have just received notification that you have won the $2.5 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you're around to collect), 63 years from now. What is the present value of your windfall if the appropriate discount rate is 7 percent

Answer 1

Answer:

PV= $35,217,78

Explanation:

Giving the following information:

Future value= $2,500,000

Number of periods= 63 years

Interest rate= 7% compounded annually

To calculate the value of the prize today, we need to use the following formula:

PV= FV/(1+i)^n

PV= 2,500,000 / (1.07^63)

PV= $35,217,78