Congratulations! You have just won $1,000,000 in the New York Lottery. You will receive payments of...

Congratulations! You have just won $1,000,000 in the New York Lottery. You will receive payments of $40,000 per year (at the end of each year) for the next 25 years. If the discount rate is 14 percent, what are your winnings worth today?

Expert Solution

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=40,000*[1-(1.14)^-25]/0.14

=40,000*6.87292744

=$274917.1(Approx)

jeff jeffy answered 2 years ago

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