Explore BrainMass

Explore BrainMass

    The Lottery: Calculating Present Value

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Question: The $40 million lottery payment that you just won actually pays $2 million per year for 20 years. If the discount rate is 8%, and the first payment comes in 1 year, what is the present value of the winnings? What if the first payment comes immediately?

    © BrainMass Inc. brainmass.com June 3, 2020, 5:55 pm ad1c9bdddf
    https://brainmass.com/business/annuity/the-lottery-calculating-present-value-42214

    Solution Preview

    1. If the first payment comes in 1 year, we can use the PVIFA table to get the annuity factor to find out the present value. The ...

    Solution Summary

    This solution explains how to calculate the present value of lottery winnings using ordinary annuity and annuity due. All calculations are shown and interpretations of the results are also included.

    $2.19

    ADVERTISEMENT