Question
A lottery prize worth $1,000,000 is awarded in payments of $10,000 five times a year for 20 years. Suppose the money is worth 20% compounded five times per year.
What is the formula used to find the present value of the prize?
What is the formula used to find the present value of the prize?
Answers
Reiny
i = .20/5 = .04
n = 20x5 = 100
PV = 10 000(1 - 1.04^-100)/.04
= 245 049.99
20% interest!!! Wow, what fantasy place is this?
n = 20x5 = 100
PV = 10 000(1 - 1.04^-100)/.04
= 245 049.99
20% interest!!! Wow, what fantasy place is this?