Q2 You have just won the Georgia Lottery with a jackpot of $40,000,000. Your winnings will be
paid to you in 26 equal annual installments with the first payment made immediately. If you feel
the appropriate annual discount rate is 8%, what is the present value of the stream of payments
you will receive?
Answers
Answered by
5
Explanation:
Number of payments (nper)= 26
Annual discount rate(rate) = 4.7%
Present value of series of payments(PV) = $ 23,888,712
Answered by
0
The present value of the stream of payments received is $5,408,070.
Given:
Total amount won by Georgia as lottery = $40,000,000/-
Number of equal installments = 26
Annual discount rate = 8 %
To Find:
The present value of the stream of payments
Solution:
The given question can be solved very easily as shown below.
The formula to find the present value is given below,
⇒ PV = FV/ (1 + i )ⁿ
Where PV = Present Value
FV = Fixed Value
i = rate of return
n = number of equal installments
⇒ PV = 40,000,000/( 1+0.08)²⁶
⇒ PV = 40,000,000/1.08²⁶
⇒ PV = 5,408,070
The present value of the stream of payments received is $5,408,070.
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