You win the lottery and are told you won $43000000. You actually won $1000000 every year...

You win the lottery and are told you won $43000000. You actually won $1000000 every year for the next 43 years. If the first payment were to be made today and your required rate of return is 7% (effective annual rate) what would you accept today (in dollars) in exchange for all those 43 payments? (Round your answer to three decimal places.

Expert Solution

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

=1.07*1000000*[1-(1.07)^-43]/0.07

=1000000*14.452449

which is equal to

=$14452448.985(Approx)

jeff jeffy answered 2 years ago

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