Lottery Finance
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The lottery is $60,000,000 and the state offers to pay you $3,000,000 per year for the next 20 years, or you can take the lump sum today of $29,500,000. If you choose to take the $3,000,000 per year for 20years, the state will invest that $29,500,000 today so that it can give you those payments per year for 20 years. What rate will the $29,500,000 be invested at today to insure that the $3,000,000 will be available to pay you every year for the next 20 years?
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Solution Summary
This solution contains step-by-step calculations to determine the PV in an annuity payment with interest rate. It tells you what rate the $29,500,000 be invested currently to insure that the 3 million will be available to pay every year for the next 20 years.
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This is an annuity payment. We know the PV of annuity. Need to calculate the interest rate.
Formula for PV of annuity ...
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