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?

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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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