Question

You've won the lotto jackpot of $1,000,000. They wnt to pay it to you at $50,000 a year for 20 years. You ask them what kind of discount rate they would use if you wanted a lump sum today instead and tell you 6%. What would your lump sum payment be?

Answer 1

Year	Cash Flow	PVF at 6%	Present Value
1	50,000.00	0.9434	47,169.81
2	50,000.00	0.8900	44,499.82
3	50,000.00	0.8396	41,980.96
4	50,000.00	0.7921	39,604.68
5	50,000.00	0.7473	37,362.91
6	50,000.00	0.7050	35,248.03
7	50,000.00	0.6651	33,252.86
8	50,000.00	0.6274	31,370.62
9	50,000.00	0.5919	29,594.92
10	50,000.00	0.5584	27,919.74
11	50,000.00	0.5268	26,339.38
12	50,000.00	0.4970	24,848.47
13	50,000.00	0.4688	23,441.95
14	50,000.00	0.4423	22,115.05
15	50,000.00	0.4173	20,863.25
16	50,000.00	0.3936	19,682.31
17	50,000.00	0.3714	18,568.22
18	50,000.00	0.3503	17,517.19
19	50,000.00	0.3305	16,525.65
20	50,000.00	0.3118	15,590.24
Present Value/Lumpsum amount			573496.06