Question

Suppose a state lottery prize of $8 million is to be paid in 5 payments of $1,600,000 each at the end of each of the next 5 years. If money is worth 12%, compounded annually, what is the present value of the prize? (Round your answer to the nearest cent.)

Answer 1

The answer is $5767641.92

Step-by-step explanation:

PV of an Annuity = C x [ (1 – (1+i)-n) / i ]

PV of an Annuity = $1,600,000 x [ (1 – (1+0.12)-5) /0.12 ] = $5767641.92

The present value of the prize is $5767641.92