Answer:
The present value of your winnings is <u>$1,959,555.65</u>.
Explanation:
Since this is an annuity due as already hinted in the question, the formula for calculating the present value (PV) of an annuity is used as follows:
PV = P × [{1 - [1 ÷ (1 + r)]^n} ÷ r] × (1 + r) .................................. (1)
Where ;
PV = Present value of winnings =?
P = Annual payment = $200,000
r = interest rate = 9.25%, or 0.0925
n = number of years = 20
Substituting the values into equation (1) above, we have:
PV = $200,000 × [{1 - [1 ÷ (1 + 0.0925)]^20} ÷ 0.0925] × (1 + 0.0925)
PV = 200,000 ×8.96821807613347 × 1.0925
PV = $1,959,555.65
Therefore, the present value of your winnings is <u>$1,959,555.65</u>.
