Question

You win a prize of 20 annual installments of $100,000. You spend your payments for seven years and then save for 13 years. If you can save winnings at 7% interest, how much would you have at the end of 20 years?

Answer 1

FV $2,014,064.29

Step-by-step explanation:

The first seven years are spended entirely, so are not into the calculation.

Then we will calculate the future value of an annuity of 100,000 for 13 years at 7% interest rate.

The formula will be:

`C * ((1+r)^(time) -1)/(rate) = FV\\`

Where:

C 100,000

time 13

rate 0.07

`100,000 * ((1+0.07)^(13) -1)/(0.07) =FV\\`

We solve and got:

FV $2,014,064.29

This is the amount after 20 years, saving the last 13 years