Question

Find the cash value of the lottery jackpots given below. Yearly jackpot payments begin immediately. Assume the lottery can invest at the given interest rates.

                                                                              

JackpotAmount	InterestRate	Equal AnnualPayments	Present Value(in dollars)
$4,000,000	5%	20	$
$4,000,000	9%	20	$
$4,000,000	5%	25	$
$4,000,000	9%	25	$

Answer 1

cash value is calculated using PV function in Excel :

rate = interest rate

nper = number of years

pmt = -yearly payment

fv = 0 (amount received at end is zero)

type = 1 (each payment is received at beginning of year)