Question

Ms. Jones won on a state lottery ticket. The attorney informed Ms. Jones that at a 5% discount rate, she could choose to withdraw $100,000 of funds at the end of each year for the next four years.

Answer 1

$354,600

Explanation:

The PV (present value) of a USD 100,000 outcome at the end of each year for the next four (4) years is USD 354,600.

Present value (PV) of annuity = USD 100,000 at 5% for 4 years

Present Value of Annuity of $1

= 3.546 × USD 100,000

= $354,600