Sharon Kabana has won a state lottery and will receive a payment of $89,729.45 every year, starting...

Question

Sharon Kabana has won a state lottery and will receive a payment of $89,729.45 every year, starting today, for the next 20 years. If she invests the proceeds at a rate of 7.25 percent, what is the present value of the cash flows that she will receive? Round to the nearest dollar.

Robert · Accepted Answer

Present Value of an annuity due: PV = Pmt x ((1-((1+r)
-n
 )) / r) x (1+r) 
Payment per period (PMT) = $89,729.45 
Discount Rate per period= 7.25% 
Number of periods (n) = 20 
PV = $89,729.45 x ((1-((1+0.0725)
-20
)) / 0.0725) x 1.0725 = $999,999.95 or $1,000,000

Sharon Kabana has won a state lottery and will receive a payment of $89,729.45 every year, starting today, for the next 20 years. If she invests the proceeds at a rate of 7.25 percent, what is the...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment