Question

Shelley wants to cash in her winning lottery ticket. She can either receive eight $100,000 semiannual payments starting today, or she can receive a single-amount payment today based on a 6% annual interest rate. What is the single-amount payment she can receive today?

Answer 1

single-amount payment $925,160

Step-by-step explanation:

Given data:

Amount $100,000

Rate 6%

interest semi annually 3%

Number of period 5

Lumpsum Payment
`= A* {PVAF@ I,n}`

`= A* {PVAF@ 3\%,5}`

calculation for PVAF

PVAF @ I,N
`=((1-(1+I)^-N))/(I)`

PVAF@ 3%,5
`= ((1-(1+0.03)^(-5)))/(0.03)`

=4.58

Lumpsum Payment =202000*4.58

=925160