Question

You have just received notification that you have won the $2.04 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you’re around to collect), 76 years from now. What is the present value of your windfall if the appropriate discount rate is 9 percent? (Enter your answer in dollars, not millions, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value $

Answer 1

Answer:

Present value is $2918.88

Explanation:

Given Data:

Amount won=$2,040,000

Number of years=76 years

Interest rate=i=9%=0.09

Required:

Present value=?

Solution:

Formula

$FV=PV(1+i)^n$

Where:

FV is the future value=$2,040,000

PV is the present value

i is the interest rate=0.09

n is the number of years=76

$PV=\frac{FV}{(1+i)^n}\\ PV=\frac{\ 2040000}{(1+0.09)^{76}}\\ PV=\ 2918.88$

Present value is $2918.88