Question

You just won the lottery, which promises you $260,000 per year for the next 20 years, starting today (annuity due). If your discount rate is 7%, what is the present value of your winnings?

Answer 1

Answer:

the present value of your winnings will be $2,947,254.76.

Explanation:

The Present Value, PV of the Annuity due can be calculated as follows :

Pmt = $260,000

P/yr = 1

n = 20

r = 7%

Fv = $0

Pv = ?

Using a financial Calculator, the Present Value, PV of the Annuity due is $2,947,254.76