Question

You have just won ​$20,000 in the state​ lottery, which promises to pay you ​$1,000​ (tax free) every year for the next twenty years. The interest rate is​ 5%. In​ reality, you receive the first payment of ​$1,000​ today, which is worth ​$ nothing today. ​(Round your response to the nearest penny.​) The value of the second​$1,000 payment is worth ​__________ $

Answer 1

$952.38

Step-by-step explanation:

The net present value is given by the expression as shown below:

`NPV=(Future value)/((1+r)^(n) )`

Plugging the values in the above expression,

r=0.05

Future value =$1,000

n=1

`NPV=(1000)/((1+0.05)^(1) )\\NPV=952.38`

The value of the second​$1,000 payment is worth $ 952.38