Question

I recently found a real-life advertisement in the newspaper. (Only the phone number has been changed.) Suppose that you have won a $10,000,000 lottery, paid in 20 annual installments. How much would be a fair price to be paid today for the assignment of this prize? Assume the money could be invested at 11%. (Assume the lottery pays out as an ordinary annuity. Round your answer to the nearest cent.)

Answer 1

P*1.11^20 = 10000000
P = 10000000/1.11^20 ≈ 1.24 million

Answer 2

I recently found a real-life advertisement in the newspaper. (Only the phone number has been changed.) Suppose that you have won a $10,000,000 lottery, paid in 20 annual installments. How much would be a fair price to be paid today for the assignment of this prize? Assume the money could be invested at 10%. (Assume the lottery pays out as an ordinary annuity. Round your answer to the nearest cent.)