Question

You have just won the Georgia Lottery with a jackpot of $17,000,000. Your winnings will be paid to you in 26 equal annual installments with the first payment made immediately. If you had the money now, you could invest it in an account with a quoted annual interest rate of 10% with monthly compounding of interest. What is the present value of the stream of payments you will receive

Answer 1

Answer:

Georgia Lottery

The present value of the stream of payments that you will receive is:

= $3,680,268

Explanation:

a) Data and Calculations:

Jackpot won = $17,000,000

Annual installments = 26 years

First payment is made immediately.

Interest rate per annum = 10%

N (# of periods)  26

I/Y (Interest per year)  10

PV (Present Value)  0

FV (Future Value)  17000000

Results

PMT = $141,548.78

Sum of all periodic payments = $3,680,268.22

Total Interest = $13,319,731.78

The present value of the stream of payments equals the PV of annual payments received multiplied by 26.